Hoglund et al v. Kautter et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Craig Hoglund and Christine Hoglund, 	)
)
Plaintiffs, 	)
) 	REPORT AND RECOMMENDATION
vs. 	)
)
Commissioner of Internal Revenue, David 	)
J. Kautter, Internal Revenue Service, its 	)
officers, employees, and corps including Dana 	) 	Case No. 1:18-cv-189
(Hill) Fairchild, in her official capacity, and 	)
Doreen Peterson, her official capacity, et al., 	)
)
Defendants. 	)
Before the court is defendants’ motion to dismiss for insufficient service, lack of jurisdiction
and failure to state a claim for which relief may be granted. Also before the court are plaintiffs’
motions for summary judgment, injunctive relief, and leave to file an amended complaint. Judge
Hovland has referred these motions to the undersigned for preliminary consideration. 	For the
reasons set forth below, the undersigned recommends dismissal of this action without prejudice on
account of insufficient service and deem the remainder of the motions moot.
I. 	BACKGROUND
A. 	General Background
Unless otherwise indicated, the following facts are cobbled together from plaintiffs’
complaint along with an affidavit and IRS records filed by defendants in support of their motion to
dismiss. The United States contends the latter are relevant to resolve the question of whether the
court has jurisdiction. Plaintiffs filed their 2006 and 2007 federal income tax returns on October 15,
2007, and October 15, 2008, respectively. (Doc. Nos. 1 at p. 4; 18-1 at p. 2; 18-2 at p. 2). On May
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11, 2009, the IRS assessed plaintiffs’ additional tax liabilities for tax year 2006. (Doc. Nos. 18; 18-1
at pp. 2).
Plaintiffs filed amended or “completed” federal income tax returns for tax years 2006 and
2007 on October 15, 2007, and March 24, 2010. (Doc. Nos. 1, p. 4; 18-1, p. 3). On April 12, 2010,
the IRS assessed plaintiffs additional tax liabilities for tax year 2007. 	(Doc. Nos. 18; 18-2 at p. 2).
Plaintiffs submitted to an examination by an IRS examiner on January 29, 2011. (Doc. No.
1, p. 4). They filed notice of their dispute with the examiner's report for tax year 2006 upon its
issuance on May 2, 2011, and requested an appeal hearing. (Id.). On August 2, 2011, they received
a second examiner's report that they also disputed. (Id. at pp. 4-5).
On or about August 14, 2012, the IRS filed notices of federal tax liens against plaintiffs. (Id.
at p. 5; Doc. No. 18-1 at p. 3; 18-2 at p. 3). Plaintiffs claim they made payments under the belief
that the liens would be removed. (Id,; Doc. Nos. 18-1 at pp. 4-5). The liens were not removed as
plaintiffs had expected. (Doc. No. 1 at p. 4). Meanwhile, plaintiffs’ requests for hearings on the
examiner’s reports and/or appeal hearings were denied. (Id. at pp. 5-6).
Plaintiffs’ other efforts to have the IRS extinguish or remove the liens were unsuccessful.
(Id. at pp. 5-6, 8). They filed an administrative claim against the IRS by way of letter dated March
17, 2017, which later was denied. (Id. at p. 8).
Plaintiffs also petitioned the United States Tax Court for relief with respect to the 2006 and
2007 tax years. 	(Id. at p. 6). 	On May 14, 2018, the tax court dismissed their case for lack of
jurisdiction on grounds that it had not been timely filed. In the memorandum order granting the
Commissioner’s motion to dismiss, the court noted that “petitioners are not without recourse to
challenge their liability; they may pay their outstanding liability and file a claim for refund.”
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Hoglund v. Commissioner, Doc. No. 18823-16 L, United States Tax Court, Order dated May 14,
2018.
As for the IRS’ continued collection efforts, notices of intended levy were issued for the
2006 and 2007 tax years on March 13, 2017. Also, a notice of federal tax liens covering the two tax
years was filed on June 15, 2018, and a lien-filing collection due process notice was issued on June
19, 2018. (Doc. No. 18-2).
Plaintiffs assert they are entitled to tax refunds for tax years 2006 and 2007. (Id.). The IRS,
however, maintain that plaintiffs have outstanding liabilities as of the date of the filing of plaintiffs’
complaint of $869.01 for tax year 2006 and $42,172.44 for tax year 2007—at least as of the time of
the filing of the complaint. (Doc. Nos. 18; 18-1 at p. 10; 18-2 at p. 7).
B. 	Procedural History
Plaintiffs initiated the above-entitled action pro se on September 17, 2018. (Doc. No. 1).
They appear, as best the undersigned can discern, to be taking issue with additional income tax,
interest, and penalties assessed against them by the Internal Revenue Service (“IRS”) for tax years
2006 and 2007.1 They cite 26 U.S.C. §§ 6325, 7422, 7432, and 7433, 26 C.F. R § 301.7433-1, and
various sections of the Internal Revenue Manual as the basis for this court’s exercise of jurisdiction.
In their Complaint, under heading “Claims,” they incorporate by reference the administrative record.
Per Tax Court Rule 210(b)(12) and Michael Thomas Garrett-Tex Court Bar No. GM0632,
attorney representing the Commissioner in Docket No: 17639-17L before the United States
Tax Court, the Administrative Record in possession of the Internal Revenue Service and the
Commissioner of the Internal Revenue will contain all the Plaintiffs facts, financials
disputes, and claims including all names, dates and specifics . . .
1 If plaintiffs’ had wanted to litigate issues other than the taxes, interest and penalties assessed to them in tax
years 2006 and 2007, they failed to make their intent clear.
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(Doc. No. 1). They go on to describe their interactions with the IRS in regards to their dispute over
the assessment of liabilities for tax years 2006 and 2007. In so doing, they accuse various IRS
employees with obstruction and flouting with IRS rules, regulations, and procedures. In their prayer
for relief, they request tax refunds and compensatory damages for the alleged wrongful actions of
defendants as outlined in their March 17, 2017, administrative claim letter, which they also
incorporate by reference.
On December 17, 2018, defendants filed a motion to dismiss, a brief in support of the
motion, the declaration of IRS Advisory Revenue Officer Sheryl McCanlies, a copy plaintiffs’
administrative claim letter dated March 17, 2017, and copies of IRS Form 4340 for tax years 2006
and 2007. (Doc. Nos. 16-18). Reading the administrative claim letter in conjunction with plaintiffs’
complaint, defendants identify three claims: (1) an attack on the merits of the tax assessments and
an associated refund demand for a refund under 26 U.S.C. § 7422; (2) damages for failure to release
a lien under 26 U.S.C. § 7432; and (3) damages for unlawful collection activities under 26 U.S.C.
§ 7433. 	Defendants go on to assert that this court lacks subject matter jurisdiction because the
United States has not waived its sovereign immunity, that plaintiffs’ complaint otherwise fails to
state any cognizable claims, and that plaintiffs have not properly served the United States.
On January 14, 2019, plaintiffs filed a combined response to defendants’ motion to dismiss
and motion for summary judgment. 	(Doc. Nos. 19 and 20). Notably, they do not take issue with
how defendants have construed their claims or categories of relief or otherwise take the position
have asserted additional claims that defendants missed. 	Rather, they challenge the grounds for
dismissal advanced by defendants. 	In so doing, they characterize defendants’ assertion that they
“did not pay the ‘illegally calculated assessments’ nor request refunds” as a “bold faced lie” because
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“ IRS records do show that [plaintiffs] paid [the IRS’s] illegal assessment in dispute.” (Doc. No.
19 at pp. 12–13).
On January 16, 2019, defendants filed an unopposed motion to stay this action, citing the
lapse of appropriations and the resulting government shutdown. (Doc. No. 21). The court granted
defendants’ motion the following day. (Doc. No. 22).
On January 28 2019, defendants filed a motion to lift the stay as the Congress had
appropriated funds for the Department of Justice. (Doc. No. 23).
On January 31, 2019, plaintiffs filed a combined motion for injunctive relief and response
to defendants’ January 16, 2019, unopposed motion to stay this action. (Doc. No. 24). That same
day the court issued an order granting the defendants’ motion to lift the stay and establishing a
briefing schedule for the pending motions. (Doc. No. 27).
On February 14, 2019, defendants filed a response to plaintiffs’ motion for injunctive relief
and a reply in support of their motion to dismiss. (Doc. Nos. 28 and 29). On February 21, 2019,
they filed a response to plaintiffs’ motion for summary judgment. (Doc. No. 31).
On March 27, 2019, plaintiffs filed a motion seeking leave to file an amended complaint.
(Doc. No. 31). That same day defendants filed a response in opposition to plaintiffs’ motion for
leave to amend the complaint (Doc. No. 33).
On June 19, 2019, plaintiffs filed proof of service on IRS Commissioner David J. Kaulter,
IRS Revenue Officer Dana Fairchild (Hill), Doreen Peterson, and Christopher Myers, former U.S.
Attorney for the District of North Dakota. (Doc. No. 34).
On September 16, 2019, the court received an eight-page letter from plaintiffs. In the letter
plaintiffs advise, among other things, that the some of their accounts have been partially
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abated/credited but they are still waiting for the IRS to “zero out” all of the assessments, lift all of
the liens against them, and refund them $69,792 for tax year 2006 and $18,640 for tax year 2007.
II. 	DISCUSSION
A. 	This action involves only the 2006 and 2007 tax years and is a suit against the
United States and its agency the Internal Revenue Service
It appears plaintiffs have disputes with the IRS involving a number of tax years. However,
the complaint in this action, fairly construed, involves only the 2006 and 2007 tax years.
A suit against the IRS is treated as one against the United States. Jones v. I.R.S., 216 F.
Supp. 2d 955, 958 (D. Neb. 2002), aff'd, 60 F. App'x 642 (8th Cir. 2003) (internal quotation marks
omitted); see also Carelli v. IRS, 668 F.2d 902, 904 (6th Cir.1982). A suit against IRS employees
in their official capacities is likewise treated as one against the United States. See, e.g., Buford v.
Runyon, 160 F.3d 1199, 1201 (8th Cir.1998) (“[i]t is well settled that ‘an official-capacity suit is,
in all respects other than name, to be treated as a suit against the entity’”) (quoting Kentucky v.
Graham, 473 U.S. 159, 166 (1985)).2
B. 	Defendants’ Motion to Dismiss for Insufficient Service
Rule 4 of the Federal Rules of Procedure sets forth the following requirements for
effectuating service on the United States and its agencies, officers or employees:
(1) United States. To serve the United States, a party must:
(A)(i) deliver a copy of the summons and of the complaint to the United States attorney
for the district where the action is brought--or to an assistant United States attorney or
clerical employee whom the United States attorney designates in a writing filed with the
court clerk--or
(ii) send a copy of each by registered or certified mail to the civil-process clerk at
2 In their proposed amended complaint, plaintiffs seek to sue the United States. However, they already are
doing so, which makes the proposed amendment redundant.
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the United States attorney's office;
(B) send a copy of each by registered or certified mail to the Attorney General of the
United States at Washington, D.C.; and
(C) if the action challenges an order of a nonparty agency or officer of the United States,
send a copy of each by registered or certified mail to the agency or officer.
(2) Agency; Corporation; Officer or Employee Sued in an Official Capacity. To serve a
United States agency or corporation, or a United States officer or employee sued only in an
official capacity, a party must serve the United States and also send a copy of the summons
and of the complaint by registered or certified mail to the agency, corporation, officer, or
employee.
(3) Officer or Employee Sued Individually. To serve a United States officer or employee
sued in an individual capacity for an act or omission occurring in connection with duties
performed on the United States' behalf (whether or not the officer or employee is also sued
in an official capacity), a party must serve the United States and also serve the officer or
employee under Rule 4(e), (f), or (g).
Fed. R. Civ. P. 4(i)(1).
In this case, plaintiffs served the IRS Commissioner, at least one or more other IRS officials,
and the office of the United States Attorney for the District of North Dakota. 	(Doc. No. 34).
Defendants contend in their motion to dismiss that plaintiffs failed, however, to send a copy of the
summons and complaint to the Attorney General of the United States.
In response, plaintiffs have not offered proof service upon the United States Attorney
General. Rather, they contend they sent a copy of the summons and complaint to the North Dakota
Attorney General’s office and that this suffices. Unfortunately for plaintiffs, it does not.
In an action against the United States or one its officials, failure to serve the United States
Attorney General is grounds for dismissal even if the other requirements for service have been
satisfied and the United States has been aware of the suit through other channels. 	Hegmann v.
United States, 745 F. Supp. 886, 891 (E.D.N.Y. 1990) (failure to timely serve the Attorney General
required dismissal even though the U.S. Attorney’s Office was properly served and had advised
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main Justice of the pendency of the action); see also Dillehay v. Dep't of Hous. & Urban Dev., 334
F. App'x 53, 54 (8th Cir. 2009) (“Dillehay”) (unpublished per curiam) (affirming the dismissal of
a complaint against federal agencies for insufficient service of process for failure to serve the United
States Attorney General); Whitfield v. American Federation of Government Employees, No. 5:18-
cv-00229, 2020 WL 1310547, *2 (E.D. Ark. Mar. 18, 2020) (“Whitfield”) (failure to mail a copy
of the summons and complaint to the Attorney General of the United States and the U.S. Attorney’s
Office warranted dismissal of plaintiff’s claims for lack of jurisdiction); Israel v. Everson, No.
4:05–cv–184, 2005 WL 3277981, at *8 (S.D. Iowa Oct. 14, 2005) (same); cf. 	Adams v.
AlliedSignal Gen. Aviation Avionics, 74 F.3d 882, 885 (8th Cir.1996) (district court lacked
jurisdiction over a defendant that was improperly service regardless of whether or not defendant had
actual knowledge of lawsuit)
While Rule 4 provides some opportunity for relief from technical violations of its
requirements, substantial compliance is not one of them. Rather, in situations such as this, Rule
4(i)(4) requires that a party be given a reasonable opportunity to cure the defect. But, if proper
service is not then made, the court must dismiss the action without prejudice. E.g., Dillehay, supra;
Whitfield, 2020 WL 1310547, *2; Fed. R. Civ. P. 4(m).
Here, plaintiffs have had more than a reasonable amount of time to correct the deficiency in
that the defect in service was pointed out to them long ago by defendants’ motion to dismiss. See,
e.g., Kurzberg v. Ashcroft, 619 F.3d 176, 185 (2d Cir. 2010) (“notification to the plaintiff by the
defendant, rather than by the court, of a defect in the service of process is sufficient to start the clock
on the reasonable amount of time afforded to the plaintiff to cure the defect”). 	But, instead of
attempting to cure the defect, plaintiffs chose to stand fast on their position that service upon the
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North Dakota Attorney General sufficed.3
Finally, plaintiffs’ lack of adherence to the requirements of Rule 4(i) is not excused by virtue
of the fact they are proceeding pro se. See Soliman v. Johanns, 412 F.3d 920, 922 (8th Cir. 2005)
(“Even pro se litigants must comply with court rules and directives.”); see also Semler v. Klang, 603
F. Supp. 2d 1211, 1227 (D. Minn. 2009) (“Although we acknowledge that, as a pro se litigant, the
Plaintiff is entitled to certain leniencies in the prosecution of his case, we cannot ignore the
requirement that the Plaintiff effect proper service of process on the Defendants.”); Hinz v.
Washington Mut. Home Loans, No. 03-3203, 2004 WL 729239, at *2 (D. Minn. Apr. 2, 2004)
(citing Sieg v. Karens, 693 F.2d 803, 807 (8th Cir.1982), for the proposition that “actual notice by
a defendant of a suit does not lift the burden of the service requirement from a plaintiff.”). They,
like every other litigant appearing before the court, are bound by the rules.
C. Defendants’ Other Grounds for Dismissal
With defendants having elected to assert the defense of insufficient service of process and
dismissal on this grounds being warranted, the undersigned recommends that the court not address
the other grounds for dismissal. For one thing, it requires the court to wade into the intricacies of
federal tax law and attempt to apply it in a confusing set of facts. 	Also, it requires consideration
of matters outside of the pleadings in order to address defendants’ argument that the court lacks
subject matter jurisdiction.
The undersigned’s concern about the latter is that the court might not have the full story in
front of it. Particularly troublesome is a footnote in defendants’ brief which states in part that: (1)
3 Also, plaintiffs' statement in their motion for injunctive relief that they are remanding the complaint and
summons to the United States also does not constitute service under Rule 4(i).
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the IRS has “scheduled” an abatement of a miscalculated penalty for the tax year 2006, but had not
yet “paid” it; and (2) the IRS Appeals Office has issued a determination to accept plaintiffs’ 2006
and 2007 tax returns as filed and scheduled a refund to be paid plaintiffs but has not yet “paid” it.
What is not clear from the material submitted by the United States outside of the pleadings
is when these two determinations of abatement and acceptance of plaintiffs’ tax returns for the 2006
and 2007 tax years were made relative to the date of the filing of the complaint in this action. Why
that may be of some significance requires some explanation.
Defendants’ argument for why the court lacks subject matter jurisdiction over plaintiffs’
claim for refund for the tax years 2006 and 2007 is the alleged failure of plaintiffs to first pay the
amounts assessed by the IRS—a well-established condition precedent to being able to sue for a
refund. See Pagonis v. United States, 575 F.3d 809, 812–13 (8th Cir. 2009) (“A taxpayer who has
not paid an income tax assessment in full, however, generally may not file suit in district court to
challenge the validity of the assessment.”); Kaffenberger v. United States, 314 F.3d 944, 958 (8th
Cir. 2003) (“Without full payment of the assessment, the district court lacks subject matter
jurisdiction over the suit as it relates to the 1990 liability.”); see also Shore v. United States, 9 F.3d
1524, 1526 (Fed. Cir.1993) (citing Flora v. United States, 362 U.S. 145, 150 (1960)).
In this case, to demonstrate there has not been complete payment, defendants have submitted
an IRS Form 4320 for each of the tax years in question. Form 4320 purports to set forth the IRS’s
official record of tax assessments, payments, and other matters. As defendants correctly point out,
IRS Form 4320 is admissible as evidence and carries with it a presumption of correctness sufficient
to establish a prima facie case as to the amount of liability of a taxpayer. E.g., United States v.
Miller, 661 Fed. App’x. 445, 447–48 (7th Cir. 2016); Perez v. U.S., 312 F.3d 191, 195 & nn.14–15
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(5th Cir. 2002); United States v. Chila, 871 F.2d 1015, 1018–19 (11th Cir. 1989).
In this case, as noted earlier, the Form 4230 for each of the 2006 and 2007 tax years reflect
that plaintiffs had outstanding tax liabilities as of the date of the filing of the complaint that had not
been paid. 	Hence, according to the defendants, the court lacks subject matter jurisdiction for
plaintiffs’ claims for refund for 2006 and 2007.
Returning then to the IRS having scheduled an abatement of miscalculated penalty for tax
year 2006, but had not yet “paid” it. If the IRS had made this determination prior to the filing of the
complaint in this action, why in a suit for a refund would a taxpayer be required as a condition
precedent to filing suit to pay an assessment that the IRS has itself determined not to be valid? And,
for the 2006 tax year, it appears that, with the abatement of the assessment, there would be no
outstanding liability to pay.
Likewise, the same is true with respect to the IRS Appeals Office having issued a
determination to accept plaintiffs’ 2006 and 2007 tax returns as filed and schedule a refund to be
paid plaintiffs 	but which had not yet been “paid” or offset against other liabilities. 	If the IRS
Appeals Office had issued the referenced determination prior to the filing of the complaint, why
would a taxpayer have to pay anything at all as a condition precedent to filing suit for a refund if the
IRS had already determined the taxpayer is entitled to a refund for the tax year(s) in question?
None of the cases cited by the government or that the undersigned has reviewed have held
that Form 4320 is the “be all to end all.” Rather, the presumption that it carries can be rebutted.4
4 The same concern exists for defendants’ argument that the complaint fails to state a claim for refund based
on its failure to allege that all outstanding tax liabilities had been paid. Plaintiffs’ allege in their complaint, however,
that are entitled to a refund for the two tax years in question. For purposes of Fed. R. Civ. P. 12(b)(6), this would
arguably be sufficient to state a claim for refund. It is only when Forms 4320 are considered that there may an issue,
but, again, this begs the question of whether in fact anything was owed for one or both the tax years in question as of
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At the end of the day, defendants might very well be right with respect their arguments for
dismissal beyond insufficiency of service of process other grounds for dismissal. The point here is
that the court need not go there if it dismisses the action without prejudice on grounds of insufficient
service of process, which the Attorney General has elected to assert as defense—but, of course, was
not required to.
D. Plaintiffs’ Motions to Amend, for Summary Judgment, and for Injunctive Relief
If the court dismisses this action without prejudice for insufficiency of service of process,
plaintiffs’ motions become moot and can termed for that reason.
III. 	RECOMMENDATION
Based on the foregoing, it is RECOMMENDED that the court:
1. 	GRANT defendants’ motion to dismiss (Doc. No. 16) but limited to the grounds of
insufficient service of process (Doc. No. 16) and DISMISS WITHOUT PREJUDICE
plaintiffs’ complaint.
2. 	DEEM AS MOOT plaintiffs’ motions to amend the complaint, for injunctive relief, and
for summary judgment (Doc. Nos. 20, 24, 31).
the time of the filing of the complaint based upon determinations the IRS itself may have made.
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NOTICE OF RIGHT TO FILE OBJECTIONS
The parties shall have until June 15, 2020, to file objections to this Report and
Recommendation. See D.N.D. Civil L.R. 72.1(D)(3). Failure to file appropriate objections may
result in the recommended action being taken without further notice or opportunity to respond.
Dated this 28th day of May, 2020.
/s/ Charles S. Miller, Jr.
Charles S. Miller, Jr., Magistrate Judge
United States District Court
.
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