JAMES A. TEILBORG, District Judge.
In 2007, this Court granted summary judgment to Defendant. Plaintiffs appealed. This case was argued before the Ninth Circuit Court of Appeals. Following argument, the Court of Appeals issued a limited remand for this Court to make factual findings to determine its jurisdiction to hear the case. Specifically, the Court of Appeals held that based on the case of John R. Sand & Gravel Co. v. United States, 552 U.S. 130, 128 S.Ct. 750, 169 L.Ed.2d 591 (2008), the statute of limitations governing this case is jurisdictional. Because jurisdiction should be raised at any point the Court's jurisdiction is in question, the Court of Appeals instructed this Court to determine when Plaintiffs discovered the facts giving rise to this lawsuit to determine whether this case is barred by the statute of limitations and therefore beyond this Court's jurisdiction. Aloe Vera of America, Inc. v. United States, 580 F.3d 867, 873 (9th Cir.2009).
This Court previously summarized the facts of this case as follows:
Doc. # 526 at 1-2.
The Court of Appeals summarized the applicable statute of limitations as follows:
Aloe Vera, 580 F.3d at 870-71.
Preliminarily, the parties dispute how this Court should interpret the remand order of the Court of Appeals. The first dispute involves whether this Court needs to determine a statute of limitations date for Count I. Defendant argues that it does not dispute this Court's jurisdiction over Count I; therefore, this Court need not take any further action with regard to Count I. Defendant further argues that for this Court to take any action on Count I over Defendant's lack of objection would be beyond the terms of the limited mandate. Plaintiffs argue that regardless of Defendant's position, this Court must still make a statute of limitations finding with regard to Count I. With respect to Count II, the parties dispute whether the Court of Appeals' use of the plural "dates" in the opinion should be interpreted to mean there are many "disclosures" each giving rise to its own statute of limitations calculation versus whether there is one disclosure date for the entire Count, but the Court of Appeals used the plural "dates" because there are multiple Plaintiffs who might each have learned of the disclosure on a different date.
Pursuant to the parties' recommendation (Doc. # 562) the Court permitted the parties to file simultaneous motions on the statute of limitations issue. Plaintiffs moved for partial summary judgment asking this Court to find that their complaint was timely with regard to both Count I and Count II. Defendant moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that this Court lacks subject matter jurisdiction over Count II.
The Court agrees with Defendant that because this statute of limitations is jurisdictional, this Court should consider this issue under Rule 12(b)(1), if possible.
Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004) (internal quotations and citations omitted). The Safe Air Court went on to caution, however, that a jurisdictional finding on a genuinely disputed fact is inappropriate when the jurisdictional
As indicated above, in deciding a motion under Rule 12(b)(1), this Court may take evidence and resolve factual disputes. Robinson v. U.S., 586 F.3d 683, 685 (9th Cir.2009) ("A district court may hear evidence regarding jurisdiction and resolve factual disputes where necessary." (internal quotations omitted)). Additionally, in deciding whether the Court has jurisdiction, the Court of Appeals has directed district courts to take whatever evidence and conduct whatever proceedings the Court deems appropriate. Valdez v. Allstate, 372 F.3d 1115, 1118 (9th Cir.2004). Therefore, although the Court will attempt to resolve this issue as a 12(b)(1) motion, the Court will consider all of the evidence submitted by Plaintiffs with their motion for partial summary judgment in the form it was presented.
The Court agrees with Defendant that the party asserting that this Court has jurisdiction bears the burden of proving jurisdiction. Kingman Reef Atoll Investments, L.L.C. v. U.S., 541 F.3d 1189, 1197 (9th Cir.2008) ("Although ordinarily the defendant bears the burden of proving an affirmative statute of limitations defense, here the statute of limitations is jurisdictional, and, when subject matter jurisdiction is challenged under Federal Rule of [Civil] Procedure 12(b)(1), the plaintiff has the burden of proving jurisdiction in order to survive the motion." (internal quotations omitted)). In this case, Plaintiffs bear the burden of proving that their claims are not barred by this jurisdictional statute of limitations.
With respect to "proving" jurisdiction, the Court notes that, as discussed in the factual background above, in 2000, the Judge to whom this case was previously assigned addressed Defendant's motion to dismiss based on statute of limitations. Doc. #26. In deciding this motion, the Judge concluded that 26 U.S.C. § 7431 was not jurisdictional. Id. at 12. This Court declined to reconsider that decision. Doc. # 65 at 3. As stated above, the Court of Appeals has determined this statute of limitations is jurisdictional. Aloe Vera, 580 F.3d at 872. Presumably as a consequence of determining the statute was not jurisdictional, the prior Judge held Plaintiffs to only a "pleading" standard to show compliance with the statute of limitations, rather than a "proof" standard. Doc. # 26 at 9 ("Here ... because Defendant moved to dismiss and not for summary judgment, the question is not whether Plaintiffs can or have proved the timeliness of their case, but whether the allegation of timeliness in the Complaint is sufficient."). Similarly, this Court required only that Plaintiffs make an "allegation" of the date of discovery in the amended complaint. Doc. # 65 at 3.
However, in deciding factual attack jurisdictional motions, "No presumptive truthfulness attaches to plaintiff's allegations." Robinson, 586 F.3d at 685; see also Safe Air, 373 F.3d at 1039. "Once challenged, the party asserting subject matter jurisdiction has the burden of proving its existence." Robinson, 586 F.3d at 685 (quoting Rattlesnake Coal. v. E.P.A., 509 F.3d 1095, 1102 n. 1 (9th Cir.2007)); see also Aloe Vera, 580 F.3d at 872-73.
Count I is premised on two allegedly false statements made by Defendant to the NTA. Plaintiffs have called these two allegedly false statements "Commission vs. Price False Statement" and "Unreported Income False Statement." Doc. # 570 at 2 n. 1. Defendant argues it cannot make a statute of limitations argument with respect to either statement in Count I because Defendant is aware of no evidence in the record that would prove that Plaintiffs learned of these statements more than two years before filing the complaint. Id. Defendant also argues that no discovery date for statute of limitations purposes can be attributed to the "Commission vs. Price False Statement" because Defendant denies that the statement was ever made. Id. Plaintiffs argue that they can prove that they learned of both of these statements within the statute of limitations.
Generally, the Court agrees with Plaintiffs that the Court cannot accept that jurisdiction over Count I is undisputed. The Court reaches this conclusion because the parties cannot stipulate to federal subject matter jurisdiction. Thus, this Court must consider its jurisdiction even if Defendant is not contesting jurisdiction. Hansen v. Department of Treasury, 528 F.3d 597, 600 (9th Cir.2007) (quoting Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983)) ("Although the Government did not contest, and the district court did not address, federal jurisdiction over Hansen's ... claims, `the defense of lack of subject matter jurisdiction cannot be waived....'").
The Court will consider the two statements that are the subject of Count I separately because Plaintiffs allege a different discovery date for each statement.
With respect to the "Commission vs. Price False Statement," Plaintiffs claim that Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan, and Maughan Holdings, Inc. learned of this statement in August 1998, within two years of the October 6, 1999 filing date of the complaint. Doc. # 567 at 4. In support of this assertion, Plaintiffs Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan, and Maughan Holdings, Inc. cite the affidavit of their general counsel, who states, "[The] notes, when received in August 1998, revealed for the first time to Plaintiffs AVA and Maughan that IE Smith told the NTA that the cost of product sold by AVA to FLPJ changed over the years but the commissions paid out to Maughan and Yamagata always stayed the same." Doc. # 483-1 at 17, ¶ 18. Thus, these Plaintiffs claim their discovery date is August 1998.
With respect to the remaining Plaintiffs, Gene Yamagata and Yamagata Holdings, Inc., counsel for the other Plaintiffs claims he gave the notes that revealed the statement to counsel for Gene Yamagata and
Returning to the Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan, and Maughan Holdings, Inc., Plaintiffs, as indicated above, Defendant asserts that this statement never occurred; therefore, Defendant cannot argue a date from which Plaintiffs learned of the statement. In this Court's summary judgment ruling, the Court found the following regarding the "Commission vs. Price False Statement:"
Doc. # 526 at 7-8.
Considering this record as a whole, this Court has already concluded that Plaintiffs did not present sufficient evidence to establish a disputed issue of fact that a false statement was actually made. As the Court in Safe Air noted, when the resolution of a factual question going to the merits determines the jurisdictional issue, the Court should not dismiss for lack of jurisdiction, but instead consider the attack to be one on the merits of Plaintiffs' claim. Safe Air, 373 F.3d at 1039-40. This claim of this Count falls into this
Alternatively, if the Court of Appeals disagrees that the factual issues and jurisdictional issues are too intertwined to independently resolve to the jurisdictional question, then this Court finds that the evidence in this record establishes that Plaintiffs Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan, and Maughan Holdings, Inc. first learned of the alleged "Commission vs. Price False Statement" in August 1998, within two years of filing the October 6, 1999 complaint. Therefore, this claim would not be barred by the statute of limitations.
Conversely, with respect to Gene Yamagata and Yamagata Holdings, Inc., these Plaintiffs offer no evidence of when they first learned of this alleged false statement. The only evidence of record on their discovery is that counsel for the other Plaintiffs avows that he gave them the notes after August 1998. Doc. # 568 at 3, ¶ 10 citing only Doc. # 566 at 6, ¶ 29. In other words, Gene Yamagata and Yamagata Holdings, Inc. never claim that receipt of the notes from the other Plaintiffs' counsel "after" August 1998 is the first time they learned of the alleged false statement.
All Plaintiffs assert that they learned of the "Unreported Income False Statement" in September 2001, approximately two years after the complaint was filed. Doc. # 566 at 6, ¶ 31. Specifically, Plaintiffs claim that this statement was contained in the "Simultaneous Examination Proposal" dated April 26, 1996. Doc. # 568 at 3, ¶¶ 12-13. Counsel for Plaintiffs Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan, and Maughan Holdings, Inc. avowed that all of the Plaintiffs (including Gene Yamagata and Yamagata Holdings, Inc.) learned of this statement for the first time through discovery in this case. Doc. # 566 at 6, ¶ 31.
As stated above, Defendant does not dispute this allegation. Based on this record, the Court finds that Plaintiffs discovered the factual basis for the "Unreported Income False Statement" in September 2001. Thus, the Court assumes that the December 17, 2001 second amended complaint, and the February 14, 2005 third amended complaint were, in part, to conform to this newly discovered evidence. Accordingly, the "Unreported Income
As indicated above, the parties dispute how this Court should interpret the Court of Appeals remand with respect to Count II. In Count II, Plaintiffs claim that Defendant's disclosure of return information to the NTA was not an "authorized disclosure" because Defendant knew or should have known the NTA was not a secure recipient.
Defendant argues that one date begins the running of the statute of limitations on Count II. More particularly Defendant argues that as soon as each Plaintiff knew of the simultaneous exam, that particular Plaintiff knew of the disclosure to the NTA, and that date of knowledge is the date that starts the statute of limitations for each Plaintiff.
Plaintiffs argue that the fact that the Court of Appeals used a plural "dates" in its decision means that this Court should determine the date of each disclosure. Doc. #574 at. Thus, Plaintiffs conclude that, "every factual assertion by the IRS [to] the NTA constitutes a separate disclosure of return information (literally hundreds of individual items concerning Mr. Maughan, AVA, and Mr. Yamagata), as defined in section 6103(b)(2)." Doc. # 577 at 7. Defendant counters that the Court of Appeals used the plural designation only because there are multiple Plaintiffs who may have different discovery dates. Doc. # 570 at 3. Thus, Defendant concludes that "dates" only directs this Court to find one discovery date for each Plaintiff. Defendant offers three specific dates on which it contends Plaintiffs knew or should have known of a disclosure; each of these dates would cause Count II to be barred by the statute of limitations. Id. at 4.
Defendant points to two specific instances in the Court of Appeals opinion which suggest that only one date begins the running of the statute of limitations with respect to Count II. Doc. # 570 at 3. Defendant quotes the opinion of the Court of Appeals as follows, "the
Conversely, Plaintiffs point to three instances where the Court of Appeals used a plural designation to show that the Court intended each disclosure to have its own discovery date. Doc. # 574 at 2. Plaintiffs quote the opinion of the Court of Appeals as follows, "make findings of fact regarding the
Based on the above quotes, the Court agrees with Defendant that the language "The district court did not make findings of fact as to
Thus, the Court will consider the statute itself and other cases decided under the statute. Courts have treated multiple disclosures to a single recipient as having one disclosure date for statute of limitations purposes, but multiple disclosures to multiple recipients as having multiple disclosure dates for statute of limitations purposes. Compare McQueen v. U.S., 264 F.Supp.2d 502, 510 (S.D.Tex.2003) (aff'd 100 Fed. Appx. 964 (5th Cir.2004)) (applying the § 7431(d) statute of limitations to a § 6103 disclosure of return information claim and treating multiple disclosures on multiple occasions to a single recipient as a single disclosure for statute of limitations purposes); with Chisum v. U.S., 1991 WL 322976, *2 (D.Ariz.1991) (applying the § 7431(d) statute of limitations to a § 6103 disclosure of return information claim and treating three disclosure into the public record (county recorder's office, mailing notices of bids, publishing notices of bids) as three separate disclosures); William E. Schrambling Accountancy Corp. v. U.S., 689 F.Supp. 1001, 1005-06 (N.D.Cal.1988) (overruled on other grounds William E. Schrambling Accountancy Corp. v. U.S., 937 F.2d 1485 (9th Cir.1991)) (applying the § 7431(d) statute of limitations to a § 6103 disclosure of return information claim and treating multiple disclosures in the form of levies to multiple banks as separate disclosures).
Outside of the statute of limitations context, the Ninth Circuit Court of Appeals has held that a single disclosure to approximately 100 people was "one" disclosure. Siddiqui v. United States, 359 F.3d 1200, 1202-03 (9th Cir.2004).
In this case, all Plaintiffs have admitted that in late 1996 they knew that some return information had been disclosed to the NTA. Doc. # 565 at 8-9 (quoting Third Amended Complaint ¶ 24). Thus, if Defendant is correct that Count II should be treated as one disclosure, with one date on which Plaintiffs knew of the disclosure, Count II is barred by the statute of limitations.
Conversely, Defendant does not dispute Plaintiffs' assertion that throughout the course of the simultaneous exam, many individual disclosures were made to the NTA. In other words, Defendant does not argue that every piece of return information was disclosed the first time Defendant exchanged information with the NTA.
The McQueen court reached this result in part because of how it interpreted the "knowledge" requirement of the plaintiff. Specifically, the McQueen Court held that the statute of limitations begins to run from when the plaintiff "knew" or "should have known" of the disclosure in violation of § 6103. Id. at 509. McQueen raised very similar arguments to Plaintiffs in this case. Specifically, McQueen argued that he timely filed his action within the two year limitation of 26 U.S.C. § 7431(d) because he did not have "actual knowledge of the alleged disclosure violation until November 8, 1999, when he claims to have discovered such in a memorandum produced by the FBI in response to McQueen's FOIA inquiries." Id. The Court held, "The date of discovery, under § 7431(d), is when one knows or should have known of the claim." Id. at 509-10 (collecting cases).
In this case, Defendant offers three separate events, all of which would cause Count II to be barred by the statute of limitations, which put Plaintiffs on notice that disclosures were occurring from the United States to the NTA. Specifically, Defendant notes that all Plaintiffs were given notice of the simultaneous examination in August 1996. Doc. #565 at 7. Next, Defendant notes that Plaintiffs admitted in their third amended complaint that they all knew in late 1996 that the United States had disclosed particular return information to the NTA. Doc. # 565 at 8-9. Finally, Defendant notes that Plaintiffs were issued and received correction notices in January 1997 from Japan based on information Plaintiffs knew came from the United States as part of the simultaneous examination. Doc. # 565 at 9-10.
Plaintiffs do not dispute Defendant's argument with respect to the first two dates. For example, Plaintiffs acknowledge that they knew of the simultaneous exam in 1996 and that they generally knew that a simultaneous exam would result in return information disclosure by Defendant; but Plaintiffs argue that they did not know on an item by item basis what was disclosed at this time. Doc. # 574 at 4-5. Similarly, with regard to the second date, Plaintiffs acknowledge that with respect to that one particular piece of information (commissions paid by Aloe Vera America to Rex Maughan and Gene Yamagata on Aloe
Using either of the first two dates advanced by Defendant as the date on which Plaintiffs knew or should have known that disclosures were made to Japan, Count II of Plaintiffs' October 6, 1999 complaint is barred by the statute of limitations. This Court agrees with the McQueen court that § 7431(d)'s statute of limitations requires that the party knew or should have known of the disclosure.
To hold otherwise would mean that the IRS giving a party notice of a simultaneous examination with another country puts that party on notice of absolutely nothing. For example, in this case Plaintiffs' argument is that they could have potentially waited 50 years to file this lawsuit if 50 years from now they filed a FOIA request and discovered that one particular document was disclosed to the NTA as part of the simultaneous examination, but it was not until that FOIA request that they knew, for certain, that particular document was disclosed. As the McQueen court noted in interpreting the two-year statute of limitations in § 7431(d), "As with all waivers of sovereign immunity, conditions on the waiver— such as a statute of limitations—must be construed strictly in favor of the sovereign." 264 F.Supp.2d at 509 (citing Block v. North Dakota, 461 U.S. 273, 287, 103 S.Ct. 1811, 75 L.Ed.2d 840 (1983)). Further, as the Court of Appeals noted in this case, a jurisdictional statute of limitations such as § 7431(d), "seeks not so much to protect a defendant's case-specific interest
Thus, the Court finds that there is only one "date" for this Court to make a finding of fact on with respect to each Plaintiff's "discovery" that Defendant had made disclosures to Japan. The Court need only find one date with respect to each Plaintiff because "discovery" includes both "knew" of the disclosures, and "should have known" of the disclosures. In this case, all Plaintiffs admit that they "knew" of the simultaneous examination in August 1996. The Court finds that as of August 1996 they "should have known" Defendant was making disclosures of return information to Japan. Thus, statute of limitations as to all of Count II began running in August 1996. Therefore, as to Count II, the Complaint filed on October 6, 1999 is barred by the statute of limitations.
Alternatively, the Court will consider, assuming the Court is in error and Count II should be treated as hundreds of individual disclosures for which "discovery" includes only "actual knowledge" of a disclosure, whether any of Plaintiffs' claims in Count II are within the statute of limitations. At this point, it was the Court's intention to list each disclosure one by one, when Defendant made the disclosure, and the date each Plaintiff (one by one) claimed to have learned of the disclosure. However, although they argue that this Court should treat each disclosure as its own cause of action, with its own statute of limitations, Plaintiffs never actually list all of the disclosures they claim Defendant made to the NTA.
Instead, Plaintiff list three "primary" instances of IRS disclosures to the NTA. Doc. # 567 at 6. The Court does not know what Plaintiffs mean by "primary." More importantly, two of the three "events" listed are not actually a disclosure of return information. Specifically, Plaintiffs list, "(1) the April 1996 [Simultaneous Exam Proposal], (2) the August 1996 IRA/NTA meeting in Phoenix, and (3) the November 1996 IRA/NTA meeting in Tokyo." Doc. # 567 at 6.
Turning to the two meetings first, the Court does not find these to be "disclosures" of return information. First, Plaintiffs never list, item by item, what was disclosed in these meetings. And, it would not be surprising for the participants to have done most, if not all, of their "disclosing" prior to the meeting so they could review the information in advance of the meeting. Second, even if the Court could glean from somewhere in this record every item "disclosed" by Defendant at these meetings, Plaintiffs have only avowed when they learned of the "meetings" not when they first learned of the disclosure of whatever items were discussed at the meetings.
For example, Plaintiffs Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan, and Maughan Holdings, Inc.'s counsel avows, "The August 1998 FOIA Release was the first time that Plaintiffs or their counsel became aware of the August 1996 and November 1996 IRS-NTA meetings or acquired knowledge of the content of the meetings." Doc. # 566 at 6,
In other words, the date that Plaintiffs learned there was a meeting or what was discussed at the meeting is certainly not the first time they learned that some items had been exchanged between Defendant and Japan.
With respect to the simultaneous exam proposal,
Finally, as the Court indicated above, Plaintiffs refer to these two meetings and the simultaneous exam proposal as the three "primary" disclosures. Presumably, Plaintiffs attempt to leave themselves the ability to argue later if some particular item was not disclosed at one of these three times, when they learned of that disclosure. Unfortunately for Plaintiffs, there is no later. This was their opportunity to prove when they learned of each individual disclosure. Accordingly, with respect to whatever unidentified disclosures Plaintiffs would claim fall outside these three "primary" disclosures, Plaintiffs failed to meet their burden of proving that they learned of these disclosures within the statute of limitations.
Therefore, even if this Court attempts to apply the mandate as Plaintiffs argue it should be applied, the Court finds Plaintiffs have failed to establish each of their discovery dates for any of the "literally hundreds" of individual disclosures that make up Count II. Accordingly, under this alternative theory, the Court continues to find Court II to be barred by the statute of limitations.
The Court considered whether the it should order either supplemental briefing or an evidentiary hearing on the "literally hundreds" of disclosures argued by Plaintiff. Valdez suggests taking such additional evidence would be within the Court's discretion in determining its jurisdiction. 372 F.3d at 1118. But Plaintiffs moved for summary judgment, and surely knew that the burden on summary judgment would be theirs. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Additionally, Defendant noted that proving jurisdiction was Plaintiffs' burden, and Plaintiff did not dispute this law. Doc. # 575 at 5. Knowing that they had the burden, Plaintiffs still failed to ever list, one by one, the disclosures that Defendant allegedly made, when Defendant made the disclosure, or when Plaintiffs (one by one) learned that Defendant had made each disclosure. This Court relies on the guidance of Pliler v. Ford, 542 U.S. 225, 231, 124 S.Ct. 2441, 159 L.Ed.2d 338 (2004), that it is inappropriate for this Court to give a party advice (because advice undermines the district judge's role as an impartial decision maker). And the Court cannot see how telling Plaintiffs exactly what to do in terms of supplemental briefing or at an evidentiary
For the reasons stated above,
As to Count I, "Commission vs. Price False Statement" and Plaintiffs Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan, and Maughan Holdings, Inc., the motion is granted;
As to Count I, "Commission vs. Price False Statement" and Plaintiffs Gene Yamagata and Yamagata Holdings, Inc. the motion is denied;
As to Count I, "Unreported Income False Statement" the motion is granted;
As to Count II, the motion is denied.
DATED this 2nd day of August, 2010.
McQueen, 264 F.Supp.2d at 509-10.
The Court notes that the Court of Appeals stated, "With respect to Count II, the district court shall make findings of fact regarding the dates on which Aloe Vera
