United States District Court, C.D. Illinois, Springfield Division
MYERSCOUGH UNITED STATES DISTRICT JUDGE.
cause is before the Court on Defendant United States'
Motion to Dismiss Plaintiffs' 1996, 1997, and 2001 Claims
for Refund (d/e 64). In the Second Amended Complaint,
Plaintiffs Randolph Martin and Catherine Martin seek to
recover excessive taxes retained by Defendant for the years
1996, 1997, 2001, and 2002. Plaintiffs allege that, after
allowing all proper adjustments on Plaintiffs' airplane
business, which suffered losses in 2001, Plaintiffs are
entitled to a refund of $297, 819 for 1996; $191, 709 for
1997; $187, 652 for 2001; and $5, 675 for 2002, plus
interest, costs, and reasonable litigation costs. Sec. Am.
Compl. ¶ 17.
3, 2016, Defendant filed a Motion to Dismiss Plaintiffs'
1996, 1997, and 2001 Claims for Refund. Defendant argues that
(1) this Court lacks jurisdiction to hear the 1996, 1997, and
2001 refund claims; (2) Plaintiffs lack standing to bring the
1996, 1997, and 2001 refund claims before this Court; and (3)
in the alternative, Plaintiffs' are judicially estopped
from bringing the 1996, 1997, and 2001 refund claims.
Motion to Dismiss is denied. The Court has jurisdiction over
the claims, and Plaintiffs have standing to bring the claims.
As for Defendant's judicial estoppel argument, given the
limited materials the Court may consider on a motion to
dismiss and the need to draw all reasonable inferences in
Plaintiffs' favor, the Court cannot conclude at this time
whether judicial estoppel is appropriate.
to Federal Rule of Civil Procedure 12(b)(1), a defendant may
move for dismissal of a claim for lack of subject matter
jurisdiction. Fed.R.Civ.P. 12(b)(1). When considering a Rule
12(b)(1) motion, this Court accepts as true all well-pleaded
factual allegations and draws all reasonable inferences in
favor of the plaintiff. Alicea-Hernandez v. Catholic
Bishop of Chi., 320 F.3d 698, 701 (7th Cir. 2003).
However, the plaintiff bears the burden of proving the
jurisdictional requirements have been met. Ctr. for
Dermatology & Skin Cancer Ltd. v. Burwell, 770 F.3d
586, 588 (7th Cir. 2014). “The court may look beyond
the jurisdictional allegations of the complaint and view
whatever evidence has been submitted on the issue to
determine whether in fact subject matter jurisdiction
exists.” Alicea-Hernandez, 320 F.3d at 701.
plaintiff also bears the burden of establishing standing. A
plaintiff must allege that (1) he suffered an injury that is
concrete and particularized and actual or imminent; (2) the
injury is fairly traceable to the challenged action of the
defendant; and (3) that it is likely that a favorable
decision will redress the injury. Berger v. Nat'l
Collegiate Athletic Ass'n, 843 F.3d 285, 289 (7th
Cir. 2016). When standing is challenged as a factual matter,
the plaintiff bears the burden of supporting the allegations
of standing with competent proof. Reid L. v. Ill. State
Bd. of Educ., 358 F.3d 511, 515 (7th Cir. 2004);
Retired Chi. Police Ass'n v. City of Chi., 76
F.3d 856, 862 (7th Cir. 1996).
considering a motion to dismiss under Rule 12(b)(6), the
Court construes the complaint in the light most favorable to
the plaintiff, accepting all well-pleaded allegations as true
and construing all reasonable inferences in the
plaintiff's favor. Tamayo v. Blagojevich, 526
F.3d 1074, 1081 (7th Cir. 2008). Rule 12(c) motions are
reviewed under the same standard as Rule 12(b)(6) motions.
St. John v. Cach, LLC, 822 F.3d 388, 389 (7th Cir.
2016). A plaintiff opposing a Rule 12(b)(6) motion to dismiss
“may submit materials outside the pleadings to
illustrate the facts the party expects to be able to
prove.” Geinosky v. City of Chi., 675 F.3d
743, 745 n.1 (7th Cir. 2012).
24, 2002, Plaintiffs commenced a Chapter 7 bankruptcy
proceeding in the United States Bankruptcy Court for the
Central District of Illinois, Case No. 05-72273 (Bankruptcy
Action). The Court takes judicial notice of the pleadings
filed in the Bankruptcy Action. See Geinosky, 675
F.3d at 745 n.1 (in ruling on a motion to dismiss, courts can
consider “information that is subject to proper
judicial notice”); Henson v. CSC Credit
Servs., 29 F.3d 280, 284 (7th Cir.1994) (holding that
district court may take judicial notice of matters of public
record, including public court documents, when considering a
Rule 12(b)(6) motion to dismiss). On October 31, 2002, the
Bankruptcy Court entered an order discharging Plaintiffs.
See Resp., Ex. L (d/e 68-12) (Bankruptcy Action
docket sheet). The Bankruptcy Action remained pending until
July 12, 2005. See id.
filed their original 2001 tax return on or about January 18,
2003, two and a half months after they were discharged in
bankruptcy. See Resp., Ex. A (d/e 68-1) (2001 tax
return signed by Plaintiffs on January 18,
2003). On or about February 15, 2005,
approximately five months before the Bankruptcy Action was
closed, Plaintiffs filed an amended 2001 tax return claiming
overpayment of taxes in the amount of $163, 124. Sec. Am.
Compl. ¶ 6. They also filed amended tax returns for 1996
and 1997 claiming overpayment of taxes in the amounts of
$297, 819 and $191, 709 respectively, and requesting a refund
in said amounts. Id. ¶ 10. Plaintiffs allege
that the basis for the refund for the 2001 tax year was
substantially due to losses from Plaintiffs' interest in
Capital Aircraft, Inc., Capital Aircraft Parts, LLC, Martin
Leasing, Inc., and other related entities. Id.
¶ 9. The basis for the refunds for years 1996 and 1997
was net operating loss carrybacks from the 2001 tax year
pursuant to the amended tax return filed for 2001.
Id. ¶ 11. On January 26, 2006, Plaintiffs filed
another amended 2001 tax return claiming an overpayment of
taxes in the amount of $187, 652. Id. ¶ 7.
Plaintiffs also filed an amended tax return for 2002, but the
2002 refund claim is not at issue in Defendant's motion
the Internal Revenue Service (IRS) commenced an audit of
Plaintiffs' income tax return for the years 1996, 1997,
2001, and 2002. Sec. Am. Compl. ¶ 14. On August 27,
2008, the IRS issued a Notice of Disallowance of
Plaintiffs' requests for refunds for calendar years 1996,
1997, and 2001. Id. ¶ 14; see also
Resp., Ex. H (d/e 68-8) (Notice of Disallowance only listing
years 1996, 1997, and 2001). On February 12, 2009, Plaintiffs
filed a Protest Letter appealing the disallowance.
Id. ¶ 15; see also Resp., Ex. I (d/e
68-9) (appealing years 1996, 1997, 2001, 2002, and 2003). On
May 11, 2011, the IRS denied Plaintiffs' claims for
refund for calendar years 1996, 1997, 2001, and 2002. Sec.
Am. Compl. ¶ 16.
6, 2013, Plaintiffs filed this lawsuit pro se alleging that
they are entitled to a refund of excessive tax paid for years
1996, 1997, and 2001. See Compl. (d/e 1). When
Plaintiffs initially filed this lawsuit, Plaintiffs had not
disclosed the tax refund claims in the Bankruptcy Action.
January 29, 2014, the United States Trustee for Region 10
filed a Motion to Reopen Bankruptcy Estate and Appoint
Trustee. Resp., Ex. N (d/e 68-14). The motion indicated that
Plaintiff Randolph Martin, through his attorney, had recently
contacted the office of the United States Trustee to advise
that past tax returns may be amended to claim a substantial
refund. Id. ¶ 3 (also noting that the refund
was first identified in 2005 and was disallowed by the IRS
but that the claim was preserved by the debtor). On February
11, 2014, the Bankruptcy Action was reopened. See
Resp., Ex. O (d/e 68-15).
March 7, 2014, the bankruptcy trustee filed a Notice of
Intent to Abandon that was sent to the creditors.
See Resp., Ex. P (d/e 68-16). The Notice indicated
that if no objections were filed by the objection deadline,
the potential claims for the refund of federal income tax
would be deemed abandoned. Id. No objections were
filed, and the bankruptcy trustee filed a report of no
distribution on April 15, 2014. See Resp., Ex. L
(Bankruptcy Action docket sheet also indicating that
“Assets Abandoned (without deducting any secured
claims): $0.00”). On May 6, 2014, the Bankruptcy Action
was closed. Id.
filed an Amended Complaint on April 7, 2014 (d/e 12). After
Defendant's Motion to Dismiss for insufficient service
was denied, Defendant filed an Answer (d/e 22) containing a
“First Defense” that, “[t]o the extent that
the plaintiff has failed to comply with the statutory period
of limitations in which to file a claim for refund, pursuant
to 26 U.S.C. § 6511, the complaint must be dismissed for
lack of jurisdiction.”
20, 2016, Plaintiffs filed a Second Amended Complaint. Sec.
Am. Compl. (d/e 63) (deleting the jury demand, amending the
refund amounts sought, and adding some additional factual
allegations). On June 3, 2016, Defendant filed an Answer (d/e
66), raising several defenses including lack of jurisdiction;
that the 1996, 1997, and 2001 tax liabilities belonged to the
bankruptcy estate when they were filed; that Plaintiffs
lacked standing to bring the 1996, 1997, and 2001 refund
claims; and that Plaintiffs are judicially estopped from
pursuing the refund claims. Defendant also filed the Motion
to Dismiss at issue herein.
Court has Jurisdiction Over the 1996, 1997, and 2001 Refund
argues that this Court lacks jurisdiction over the 1996,
1997, and 2001 refund claims because Plaintiffs did not