Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Martin v. United States

United States District Court, C.D. Illinois, Springfield Division

January 5, 2017

RANDOPLH MARTIN, and CATHERINE MARTIN, Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant

          OPINION

          SUE E. MYERSCOUGH UNITED STATES DISTRICT JUDGE.

         This 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.

         On June 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.

         The 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.

         I. LEGAL STANDARD

         Pursuant 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.

         The 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).

         When 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).

         II. BACKGROUND

         On May 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.

         Plaintiffs 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).[1] 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 to dismiss.

         Thereafter, 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.

         On May 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.

         On 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).

         On 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.

         Plaintiffs 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.”

         On May 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.

         III. ANALYSIS

         A. This Court has Jurisdiction Over the 1996, 1997, and 2001 Refund Claims

         Defendant argues that this Court lacks jurisdiction over the 1996, 1997, and 2001 refund claims because Plaintiffs did not “duly ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.