Schultz v. Homans et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
BECARREN DANIKA SCHULTZ,
Debtor. 	No. 13-08-14454 SA
BECARREN DANIKA SCHULTZ,
Plaintiff,
v. 	Adv. No. 09-1010 S
RICK HOMANS, Secretary of NM
Taxation and Revenue, and
STATE OF NEW MEXICO TAXATION
AND REVENUE DEPARTMENT,
Defendant.
MEMORANDUM OPINION ON DEFENDANTS’
MOTION TO DISMISS
This matter is before the Court on Defendants’ Motion to
Dismiss (doc 4) and Plaintiff’s Response (doc 6). 	Plaintiff
appears through her attorney Jeffrey A. Goldberg. 	Defendants
appear through Gary K. King, New Mexico’s Attorney General (James
C. Jacobsen, Assistant Attorney General). 	This is a core
proceeding. 	28 U.S.C. § 157(b)(2)(A). 	For the reasons set forth
below, the Court finds that the case should be dismissed.
THE COMPLAINT
This adversary complaint was filed on January 22, 2009 at
10:53 A.M. 	The complaint describes itself as an action brought
by the Debtor for contempt of court, and for injunctive and
declaratory relief. 	Plaintiff is a Chapter 13 Debtor in a case
filed on December 30, 2008. 	On December 31, 2008, Defendants
filed a proof of claim in the amount of $1,000, asserting
priority status for an unfiled 2007 personal income tax return.
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On January 7, 2009, Defendants objected to confirmation on the
grounds that the 2007 income tax return was unfiled. 	In fact,
Debtor had filed her 2007 income tax return on or about December
19, 2007 and it showed no taxes due. 	Plaintiff claims that
Defendants failed to make a reasonable factual inquiry as to
whether the Debtor had filed her income tax return, that the
Defendants filed a proof of claim without a reasonable factual
basis for estimating the Debtor’s tax liability, and failed to
make a reasonable factual inquiry as to the basis for objecting
to confirmation of the plan. 	Debtor filed her schedules and
statements with the bankruptcy petition and a cursory review of
the filed documents would have revealed that the $1,000 claim was
over-stated. 	Plaintiff argues that Defendants have a duty to the
Court and to the Debtor to make a reasonable review of their own
records and to establish appropriate steps and procedures to
determine whether an income tax return has been filed and to
determine the amounts of any tax liability before filing claims.
Plaintiffs argue that the proof of claim in this case was false
and fraudulent and violated criminal statutes and Rule 9011.
Plaintiff further alleges that this is not an isolated incident,
but only a single case in an overall pattern and practice in a
widespread and systematic plan to prejudice the rights of
debtors. 	Plaintiff seeks an order declaring that Defendants are
engaged in a pattern of filing false claims and objections that
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is contumacious and displays a disrespect for the Court, a
preliminary and permanent injunction enjoining Defendants from
filing false and deceptive claims and objections in this or any
other case before the Court, requiring the Defendants to conduct
an investigation into all cases in which they have filed proofs
of claims or objections to verify their accuracy, and requiring
an action plan for all future bankruptcy cases and for the
Defendants to report back on the results. 	It also seeks attorney
fees and costs in bringing this action. 	The complaint alleges no
actual damages as a result of the proof of claim or the objection
to confirmation.
The Court has reviewed the bankruptcy file and claims file
in this case, and takes judicial notice of docket item 14, filed
on January 22, 2009 at 4:51 P.M., which is a withdrawal of
objection to confirmation, and the amendment to claim number 1 by
Defendant on January 22, 2009 amending the claim to zero. 	The
Court also finds that the Debtor’s plan was confirmed on February
10, 2009.
DISCUSSION
Under Article III of the Constitution, jurisdiction of
federal courts is limited to cases and controversies. U.S. Const.
art. III, § 2. 	The doctrines of standing and mootness are
essential parts of the case-or-controversy requirement.
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Fed.R.Civ.P. 12(h)(3) states “[i]f the court determines at
any time that it lacks subject-matter jurisdiction, the court
must dismiss the action.” 	“[T]he federal courts are obliged to
police the constitutional and statutory limitations on their
jurisdiction.” 	Kanzelberger v. Kanzelberger, 782 F.2d 774, 777
(7 th Cir. 1986). 	See also Utah Animal Rights Coalition v. Salt
Lake City Corp., 371 F.3d 1248, 1255 (10 th Cir. 2004)(“The
Constitution commands that we determine whether an Article III
case or controversy is before us, whether or not the issue has
been properly raised by the parties.”) Both standing and mootness
are threshold jurisdictional issues. 	Yellow Cab Co-op. Ass’n. V.
Metro Taxi, Inc. (In re Yellow Cab Co-op. Ass’n.), 132 F.3d 591,
594 (10 th Cir. 1997). 	See also Warth v. Seldin, 422 U.S. 490,
498 (1975)(The existence of a case or controversy is the
threshold question in every federal case.)
In this case Defendant has not filed a Rule 12(b)(1) motion
to dismiss for lack of subject matter jurisdiction.
Although Defendant has not filed a Rule 12(b)(1) motion
in the instant action, the Court is permitted to raise
the issue of subject matter jurisdiction sua sponte.
See Daily v. City of Phila., 98 F.Supp.2d 634, 636
(E.D. Pa. 2000) (“Lack of subject matter jurisdiction
may be raised at any time by the court sua sponte.” );
see also Meritcare v. St. Paul Mercury Ins., 166 F.3d
214, 217 (3d Cir. 1999) (“A federal court has the
obligation to address a question of subject matter
jurisdiction sua sponte.” ), abrogated on other grounds
by Exxon Mobil Corp. v. Allapattah, 545 U.S. 546, 125
S.Ct. 2611, 162 L.Ed.2d 502 (2005).
Johnson v. United States, 2009 WL 2762729 at *2 (M.D. Pa. 2009).
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STANDING LAW
In Board of County Commissioners of Sweetwater County v.
Geringer, 297 F.3d 1108, 1111-12 (10 th Cir. 2002), the Court of
Appeals for the Tenth Circuit described the requirements of
standing in considerable detail:
“The standing inquiry requires us to consider
‘both constitutional limits on federal-court
jurisdiction and prudential limitations on its
exercise.’ ” Sac & Fox Nation of Mo. v. Pierce, 213
F.3d 566, 573 (10th Cir.2000) (quoting Warth v. Seldin,
422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343
(1975)). 	Constitutional standing derives from Article
III of the U.S. Constitution, which restricts federal
courts' jurisdiction to suits involving an actual case
or controversy. 	Schaffer v. Clinton, 240 F.3d 878, 882
(10th Cir.2001) (citing Allen v. Wright, 468 U.S. 737,
750, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984)). 	To
satisfy constitutional standing requirements, a
plaintiff must demonstrate the presence of three
elements:
(1) “injury in fact”-meaning “the invasion of a
legally protected interest that is (a) concrete
and particularized, and (b) actual or imminent,
not conjectural or hypothetical”; (2) “a causal
relationship between the injury and the challenged
conduct”-meaning that the “injury fairly can be
traced to the challenged action of the defendant”;
and (3) “a likelihood that the injury will be
redressed by a favorable decision”-meaning that
the “prospect of obtaining relief from ... a
favorable ruling is not too speculative.”
Buchwald [v. University of New Mexico School of
Medicine], 159 F.3d [487] at 493 (10 th Cir. 1998)
(quoting Northeastern Fla. Chapter of the Associated
Gen. Contractors of Am. v. City of Jacksonville, 508
U.S. 656, 663-64, 113 S.Ct. 2297, 124 L.Ed.2d 586
(1993)); see also Bennett v. Spear, 520 U.S. 154, 163,
117 S.Ct. 1154, 137 L.Ed.2d 281 (1997) (“To satisfy the
‘case’ or ‘controversy’ requirement of Article III,
which is the ‘irreducible constitutional minimum’ of
standing, a plaintiff must, generally speaking,
demonstrate that he has suffered ‘injury in fact,’ that
the injury is ‘fairly traceable’ to the actions of the
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defendant, and that the injury will likely be redressed
by a favorable decision.”) (quoting, inter alia, Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112
S.Ct. 2130, 119 L.Ed.2d 351 (1992)). 	At its core, we
have explained, constitutional standing requires a
court “to ask not only whether an injury has occurred,
but whether the injury that has occurred may serve as
the basis for a legal remedy in the federal courts.”
Schaffer, 240 F.3d at 883.
In addition to satisfying the prerequisites for
constitutional standing, a plaintiff must also meet,
generally speaking, the requirements of prudential
standing, a judicially-created set of principles that,
like constitutional standing, places “limits on the
class of persons who may invoke the courts' decisional
and remedial powers.” 	Warth, 422 U.S. at 499, 95 S.Ct.
2197; see also Allen, 468 U.S. at 751, 104 S.Ct. 3315
(describing prudential standing as “judicially
self-imposed limits on the exercise of federal
jurisdiction”). 	Under a prudential standing inquiry, a
party that has satisfied the requirements of
constitutional standing may nonetheless be barred from
invoking a federal court's jurisdiction. 	Bennett, 520
U.S. at 163, 117 S.Ct. 1154; Warth, 422 U.S. at 499, 95
S.Ct. 2197. 	Like its constitutional counterpart,
prudential standing establishes three conditions a
party must overcome before invoking federal court
jurisdiction. 	First, a plaintiff must assert his “own
rights, rather than those belonging to third parties.”
Sac & Fox Nation, 213 F.3d at 573; see also Warth, 422
U.S. at 499, 95 S.Ct. 2197 (explaining that a plaintiff
“cannot rest his claim to relief on the legal rights or
interests of third parties”). 	Second, the plaintiff's
claim must not be “a ‘generalized grievance’ shared in
substantially equal measure by all or a large class of
citizens.” Warth, 422 U.S. at 499, 95 S.Ct. 2197; see
also Allen, 468 U.S. at 751, 104 S.Ct. 3315 (explaining
that generalized grievances should normally be directed
to the legislative, as opposed to judicial, branches of
government). 	Third, prudential standing requires that
“a plaintiff's grievance must arguably fall within the
zone of interests protected or regulated by the
statutory provision or constitutional guarantee invoked
in the suit.” 	Bennett, 520 U.S. at 163, 117 S.Ct.
1154.
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When ruling on a motion to dismiss for want of standing, the
Court must accept as true all material allegations of the
complaint and must construe the complaint in favor of the
complaining party. 	Warth, 422 U.S. at 501.
MOOTNESS
A case becomes moot when the issues presented are no longer
“live” or the parties lack a legally cognizable interest. 	Yellow
Cab, 132 F.3d at 594-95 (citing County of Los Angeles v. Davis,
440 U.S. 625, 631 (1979)). 	“To qualify as a case fit for
federal-court adjudication, ‘an actual controversy must be extant
at all stages of review, not merely at the time the complaint is
filed.’” Arizonans for Official English v. Arizona, 520 U.S. 43,
67 (1997)(quoting Preiser v. Newkirk, 422 U.S. 395, 401 (1975)).
Therefore, events subsequent to the filing of a case may moot it.
Id. at 72. 	“Mootness has been described as ‘the doctrine of
standing set in a time frame: the requisite personal interest
that must exist at the commencement of the litigation (standing)
must continue throughout its existence (mootness).’” Id. at 68
n.22 (quoting United States Parole Comm’n v. Geraghty, 445 U.S.
388, 397 (1980)).
CONCLUSIONS OF LAW
When Defendant withdrew its proof of claim and its objection
to confirmation of Debtor’s plan, the case became moot as to any
relief Debtor was seeking on her own behalf. 	The Court could no
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1The Chrisman court also found that plaintiff’s requests for
declaratory relief as to the proper administration of the
Internal Revenue Code were tantamount to requests for advisory
opinions, which federal courts are prohibited from providing. 	82
F.3d at 373.
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longer fashion a remedy that would impact her in any meaningful
real life way. 	Her only remaining claims are abstract and not
concrete. 	The Court therefore lost its jurisdiction over claims
she sought on her own behalf.
As to the claims she is seeking on others’ behalves (i.e.,
the injunction sought to prevent filing of false claims in other
persons’ bankruptcies, the review of claims already filed in
other bankruptcies, the restructuring of the tax department’s
internal workings, etc.) Debtor never had the standing to seek
that relief. 	“[S]tanding to sue may not be predicated upon an
interest ... which is held in common by all members of the
public, because of the necessarily abstract nature of the injury
all citizens share.” 	Schlesinger v. Reservists Comm. to Stop the
War, 418 U.S. 208, 220 (1974). 	Debtors’ remedies, if any, lie
with the legislative branch of government. 	See also Chrisman v.
Comm’r., 82 F.3d 371, 372 (10 th Cir. 1996)(Plaintiff lacked
standing to mount sweeping challenges to IRS’ practices 1.)
Plaintiff’s claims for attorney fees and costs should be
denied.
The Court will enter an Order dismissing this adversary
complaint for lack of standing and mootness.
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Honorable James S. Starzynski
United States Bankruptcy Judge
date entered on docket: October 8, 2009
Copies to:
Jeffrey A Goldberg
Attorney for Plaintiff
PO Box 254
Albuquerque, NM 87103-0254
James C Jacobsen
Attorney for Defendants
111 Lomas NW Ste 300
Albuquerque, NM 87102-2368
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