United States District Court, D. Minnesota
MEMORANDUM AND ORDER
A. Magnuson United States District Court Judge
matter is before the Court on Defendant's Motion to
Dismiss and Plaintiffs' Motion to Amend. For the
following reasons, the Motion to Amend is denied and the
Motion to Dismiss is granted.
Gerald James Greenfield and Onyx Holding, Inc. filed this
lawsuit against Defendant United States of America on August
23, 2016. The Complaint alleges that Greenfield did not file
income tax returns for the tax years 2007 and 2008. (Compl.
(Docket No. 1) ¶ 9.) On February 10, 2010, the Internal
Revenue Service Criminal Investigation Division arrested
Greenfield on money laundering and mortgage fraud charges and
seized certain personal, business, and financial records.
(Id. ¶ 10.) Some of the seized records
contained Greenfield's tax records for 2007 and 2008.
(Id.) Plaintiffs allege that Greenfield's tax
liability is between zero and $15, 000, but because the IRS
seized his tax records he has been unable to file his 2007
and 2008 tax returns. (Id. ¶ 12.) Although
Greenfield repeatedly requested the return of his tax
records, the IRS refused. (Id. ¶ 13.)
assessed Greenfield's 2007 and 2008 income tax
liabilities at over $130, 000. (Compl. ¶ 11.)
Consequently, the IRS imposed federal tax liens on all
property Greenfield owned, including Greenfield's
homestead at 9403 Woodbridge Road, Bloomington, Minnesota
(the “Property”). (Id. ¶ 16.)
Sometime in 2015, Greenfield's mortgagee foreclosed on
the Property. (Id. ¶ 21.) The Government then
redeemed its senior lien on the Property and sought to sell
the Property by public auction on September 14, 2016.
Plaintiffs allege that the Government's redemption of the
Property was improper because the tax liens are improper.
(Id. ¶ 27.) The tax liens are improper because
they “violated Plaintiff's due process rights
because [the Government] precluded, and continued to
preclude, Plaintiff from filing his 2007 and 2008 tax returns
or in any way respond to or challenge [the Government's]
federal tax assessment and corresponding federal tax
lien.” (Id. ¶ 20.) Plaintiffs'
Complaint seeks “(1) to set aside Defendant's
federal tax lien as improper, (2) to set aside
Defendant's redemption of Plaintiff's real property,
and (3) to quiet title.” (Id. ¶ 1.)
after filing suit, Plaintiffs filed a motion for a
preliminary injunction to enjoin the Government from selling
the Property. The Court denied the motion because Plaintiffs
did not have any ownership interest in the Property and
therefore lacked standing to enjoin the sale. The Government
subsequently sold the Property.
October 25, 2016, the Government filed this Motion to Dismiss
arguing that, like the preliminary injunction motion,
Plaintiffs lack standing to sue. On February 15, 2017,
Plaintiffs filed their opposition memorandum. (Pls.'
Opp'n Mem. (Docket No. 28).) In their memorandum,
Plaintiffs concede that they lack standing to sue based on
their original Complaint, and instead seek to amend the
Complaint to eliminate any claims regarding the Property and
add claims for improper tax collection, violations of the
Fifth Amendment's Due Process Clause under Bivens v.
Six Unknown Named Agents, 403 U.S. 388 (1971), and
violations of the Federal Tort Claims Act
(“FTCA”). (Pls.' Opp'n Mem. at 1.)
Plaintiffs argue that these amendments moot the
Government's Motion to Dismiss. (Id. at 3.)
February 23, 2017, Plaintiffs filed a Motion to Amend and
attached their proposed amended complaint. (Pls.' Mot.
(Docket No. 30).) The Government contends that the proposed
amendments are futile.
of the Federal Rules of Civil Procedure allows a plaintiff to
amend their complaint once as a matter of course within 21
days after service of a Rule 12(b) motion to dismiss.
Fed.R.Civ.P. 15(a)(1)(B). In all other cases, a party may
amend its pleading only with the opposing party's written
consent or the Court's leave. The Court should freely
give leave when justice so requires. Fed.R.Civ.P. 15(a)(2).
But “there is no absolute right to amend and a court
may deny the motion based upon a finding of undue delay, bad
faith, dilatory motive, repeated failure to cure deficiencies
in previous amendments, undue prejudice to the non-moving
party, or futility.” Baptist Health v. Smith,
477 F.3d 540, 544 (8th Cir. 2007).
Government filed its Motion to Dismiss on October 25, 2016.
Plaintiffs could have therefore amended their complaint as a
matter of course on or before November 15. They did not.
After November 15, Plaintiffs could only amend with the
opposing party's written consent or the Court's
leave. Plaintiffs failed to get the Government's consent.
On February 23, less than two weeks before the hearing on the
Government's Motion to Dismiss, Plaintiffs filed a Motion
to Amend. Plaintiffs may therefore only amend their Complaint
if they can show that there was no undue delay and the
proposed amended complaint can withstand a motion to dismiss.
Motion to Amend is unduly delayed. Plaintiffs were put on
notice of the deficiencies in their Complaint by at least
October 25 when the Government filed its Motion to
Dismiss-and even earlier on September 2 when the Court denied
Plaintiffs' motion for a preliminary injunction.
Nevertheless, Plaintiffs did nothing until February 15 when
they indicated in their opposition memorandum that they
intended to amend their Complaint, and then finally filed
such a motion on February 23. Plaintiffs contend that these
amendments are “made in light of the developments that
occurred since the original Complaint was filed”
including the Court's order denying their preliminary
injunction and the return of Greenfield's tax records.
(Pls.' Supp. Mem. (Docket No. 31) at 1.) But
Plaintiffs' counsel indicated at the hearing that the IRS
returned Greenfield's tax records in September.
Therefore, these two “developments” occurred
beforethe Government's Motion to Dismiss, and
Plaintiffs' Motion to Amend could have been filed well
within the 21 days allowed to amend as a matter of course,
and surely should have been filed much earlier than February
counsel also indicated at the hearing that two other
developments that occurred in December-Greenfield's
release from prison and Plaintiffs' discovery of the
IRS's alleged stock seizure-caused the delay. But
Plaintiffs filed this lawsuit and a motion for a preliminary
injunction while Greenfield was in prison, so his
incarceration did not preclude a motion to amend.
Greenfield's release from prison has no bearing on the
delay in their Motion. Also, the three claims Plaintiffs seek
to add-an improper tax collection action, a Bivens
action, and a FTCA action-could have been brought initially,
without the additional allegations regarding the stock.
Indeed, all the claims are premised on the IRS's
withholding of ...