Umland v. Planco Fin Ser Inc

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit

9-9-2008

Umland v. Planco Fin Ser Inc
Precedential or Non-Precedential: Precedential

Docket No. 06-4688

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 PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 06-4688

CARRIE UMLAND, on behalf of herself
and all others similarly situated,

Appellant

v.

PLANCO FINANCIAL SERVICES, INC.

Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 05-cv-06806)
District Judge: Honorable J. William Ditter, Jr.

Argued November 6, 2007

Before: SCIRICA, Chief Judge, AMBRO,
and JORDAN, Circuit Judges

(Opinion filed: September 9, 2008)
Robert L. King, Esquire (Argued)
505 North Seventh Street
Suite 3600
St. Louis, MO 63101

Counsel for Appellant

James N. Boudreau, Esquire (Argued)
Littler Mendelson
1601 Cherry Street, Suite 1400
Three Parkway
Philadelphia, PA 19102

Counsel for Appellee

OPINION OF THE COURT

AMBRO, Circuit Judge

Carrie Umland worked for PLANCO Financial Services,
Inc. from 2000 to 2005. She argues that PLANCO misclassified
her as an independent contractor for several years. She also
alleges that, after finally reclassifying her as an employee,
PLANCO deducted its share of the Federal Insurance
Contributions Act (FICA) taxes—owed as a result of Umland’s
status as an employee—from her paychecks. The United States

2
District Court for the Eastern District of Pennsylvania dismissed
Umland’s putative class action, consisting of state-law claims
for breach of contract and unjust enrichment, as preempted by
federal income tax law. We affirm, albeit for reasons different
from those of the District Court.

I. Facts and Procedural History

In November 2000, Umland began working for
PLANCO, a wholly owned subsidiary of The Hartford Financial
Services Group, Inc. PLANCO sells annuities, mutual funds,
and other financial products at wholesale. Umland served as a
Regional Marketing Director for PLANCO. Her job involved
marketing financial products, such as mutual funds and
insurance, of The Hartford. She was not allowed to affiliate
with or sell the products of other financial services companies.

As a Regional Marketing Director, Umland had to
perform numerous tasks for PLANCO and comply with
company requirements.1 For example, she underwent training,
lived within the boundary of her sales territory, made a required
minimum number of sales calls per day, participated in
conference calls, and adopted company talking points in her
sales calls. Although Umland alleges that PLANCO exerted a

1
We describe these tasks and requirements in a cursory
fashion because our decision will not turn on those particular
facts.

3
high degree of control over her work, PLANCO classified
Umland and her fellow Regional Marketing Directors as
independent contractors rather than employees.

When PLANCO hired Umland, she signed an
“Independent Contractor Agreement.” As a result of this
classification, Umland and her fellow Regional Marketing
Directors were required to remit 15.3 percent of their self-
employment income in taxes under the Self-Employment
Contributions Act (SECA), 26 U.S.C. §§ 1401–03.2 (SECA
imposes the equivalent of the sum of the employee and
employer FICA taxes for employees.) Thus, PLANCO did not
withhold taxes from Umland's paychecks, nor did it pay
employer FICA taxes on Umland's wages. This arrangement
continued for over three years.

2
Section 1401(a) “impose[s] for each taxable year, on the
self-employment income of every individual, a[n old-age,
survivors, and disability insurance] tax equal to” 12.4 percent
during taxable years beginning after December 31, 1989. 26
U.S.C. § 1401(a). Section 1401(b) “impose[s] for each taxable
year, on the self-employment income of every individual, a
[hospital insurance] tax equal to” 2.9 percent during taxable
years beginning after December 31, 1985. Id. § 1401(b). The
sum of these two taxes yields a total self-employment tax of
15.3 percent. Self-employed individuals may deduct half the
SECA tax. See 26 U.S.C. § 1402(a)(12).

4
 In a letter dated December 9, 2003, PLANCO “offered to
make [Umland] a [PLANCO] employee as a Regional
Marketing Director” with an effective date of January 1, 2004.
PLA N C O enclosed an “Employee Confidentiality,
Non-Solicitation, and Work Product Ownership Agreement”
with its offer.3 Umland alleges that her title and her job
characteristics remained the same, notwithstanding the
reclassification from independent contractor to employee. What
did change was PLANCO’s withholding scheme for Umland’s
paychecks. As of January 1, 2004, PLANCO allegedly withheld
15.3 percent, which equals the sum of two distinct amounts of
7.65 percent each: (1) Umland’s employee tax under FICA, 26
U.S.C. § 3101;4 and (2) PLANCO’s employer tax under FICA,

3
Umland’s brief does not state explicitly whether she
accepted the offer of employment or signed the agreement. Her
brief blurs this factual issue by arguing that “PLANCO
unilaterally re-classified its [Regional Marketing Directors] as
employees.” Umland’s Br. 12. But she continued working for
PLANCO after January 1, 2004, an undisputed fact that suggests
that she did accept and sign the contract, contradicting the
adverb “unilaterally” in the above quote from her brief. In
addition, Umland asserted to the District Court that the
choice-of-law provisions of the employment agreement govern
this case, which further suggests that she signed the agreement.
4
Section 3101(a) “impose[s] on the income of every
individual a[n old-age, survivors, and disability insurance] tax
equal to” 6.2 percent “of the wages . . . received by him with

5
26 U.S.C. § 3111.5 Umland stopped working for PLANCO on
July 1, 2005. Approximately one month later, PLANCO
allegedly ceased withholding amount (2), the employer FICA
tax, and deducted only amount (1), the employee FICA tax, from
the paychecks of its remaining Regional Marketing Directors.

On December 30, 2005, Umland filed a class-action
lawsuit, on behalf of all PLANCO’s Regional Marketing

respect to employment” during the taxable year 1990 and
thereafter. 26 U.S.C. § 3101(a). Section 3101(b) “impose[s] on
the income of every individual a [hospital insurance] tax equal
to” 1.45 percent “of the wages . . . received by him with respect
to employment” for wages received after December 31, 1985.
Id. § 3101(b). The sum of these two taxes yields a total
employee FICA tax of 7.65 percent. Wages and employment for
purposes of § 3101 are defined in 26 U.S.C. § 3121.
5
Section 3111(a) “impose[s] on every employer an excise tax
[for old-age, survivors, and disability insurance], with respect to
having individuals in his employ, equal to” 6.2 percent “of the
wages . . . paid by him with respect to employment” during the
taxable year 1990 and thereafter. 26 U.S.C. § 3111(a). Section
3111(b) “impose[s] on every employer an excise tax [for
hospital insurance], with respect to having individuals in his
employ, equal to” 1.45 percent “of the wages . . . paid by him
with respect to employment” after December 31, 1985. Id.
§ 3111(b). The sum of these two taxes yields a total employer
FICA tax of 7.65 percent. Wages and employment for purposes
of § 3111—as for § 3101—are defined in 26 U.S.C. § 3121.

6
Directors, seeking recovery of two distinct sums. First, for the
period from November 20, 2000 through December 31, 2003,
Umland claims that PLANCO owes her and those similarly
situated half of the SECA taxes they paid during this time
because they should have been classified as employees (in which
case the total FICA tax would have been split between an
employee FICA tax and an employer FICA tax). Second, for the
period from January 1, 2004 through July 1, 2005, Umland
claims that PLANCO owes her and those similarly situated the
sums withheld from their paychecks corresponding to the
employer’s share of FICA taxes under 26 U.S.C. § 3111.

Umland, on behalf of the class, seeks to recover these
two sums on the basis of three state-law claims outlined in the
complaint: (1) breach of contract, because all employment
contracts incorporate the requirements of federal law, including
FICA, 26 U.S.C. §§ 3101-28; (2) breach of contract, because all
employment contracts incorporate the requirements of state law,
including Pennsylvania's requirement that “other deductions”
not enumerated as authorized by law in the Pennsylvania
Administrative Code receive written authorization from
employees, 34 Pa. Code § 9.1(13);6 and (3) unjust enrichment.

6
Section 9.1(13) provides that deductions other than those
listed in the previous subsections of § 9.1 must be “authorized
in writing by employe[e]s as in the discretion of the Department
is proper and in conformity with the intent and purpose of the
Wage Payment and Collection Law (43 [Pa. C.S.A.]

7
The complaint applies only legal theories (1) and (3) to the time
period from November 20, 2000 to December 31, 2003
[hereinafter “2000–03”], when Umland alleges that she was
misclassified as an independent contractor. It applies all three
legal theories to the time period from January 1, 2004 to July 1,
2005 [hereinafter “2004–05”], when Umland alleges that
PLANCO engaged in wrongful withholding.

In response to Umland’s complaint, PLANCO moved to
dismiss under Federal Rule of Civil Procedure 12(b)(6) for
failure to state a claim. On October 2, 2006, the District Court
dismissed the case for lack of subject matter jurisdiction under
Rule 12(b)(1). Umland now appeals to our Court.

II. Jurisdiction and Standard of Review

In granting PLANCO’s motion to dismiss, the District
Court referred to the motion as having been made under Rule
12(b)(1) for lack of subject matter jurisdiction. Yet PLANCO
had moved for dismissal under Rule 12(b)(6) rather than Rule
12(b)(1). We must decide whether the District Court correctly
assessed that it lacked jurisdiction and applied the appropriate
procedural rule. We have plenary review over district courts’
jurisdictional determinations. In re Phar-Mor, Inc. Sec. Litig.,
172 F.3d 270, 273 (3d Cir. 1999).

§§ 260.1—260.12).” 34 Pa. Code § 9.1(13).

8
 In her complaint, Umland alleged that PLANCO is a
citizen of Pennsylvania and that she is a citizen of Washington
State. She also alleged that the matter in controversy exceeds
$5,000,000, exclusive of interest and costs. Thus, she properly
invoked federal subject matter jurisdiction. See 28 U.S.C.
§ 1332(d)(2) (giving district courts jurisdiction over “any civil
action in which the matter in controversy exceeds the sum or
value of $5,000,000, exclusive of interest and costs, and is a
class action in which . . . (A) any member of a class of plaintiffs
is a citizen of a State different from any defendant”).

The District Court, as noted, granted the motion to
dismiss under Rule 12(b)(1). Yet the only two cases cited in
support of its decision dismissed complaints under Rule 12(b)(6)
for failure to state a claim. See McDonald v. S. Farm Bureau
Life Ins. Co., 291 F.3d 718, 726 (11th Cir. 2002) (affirming
District Court’s dismissal for failure to state a claim because
FICA does not imply a private right of action); Berger v. AXA
Network, LLC, No. 03-C-125, 2003 WL 21530370, at *4 (N.D.
Ill. July 7, 2003) (dismissing federal claim under FICA because
the latter does not imply a private right of action and dismissing
state-law claims as preempted by the federal regulatory scheme
Congress created to implement FICA). Because the issue
presented is whether Umland has stated a claim on which relief
can be granted, we will construe the District Court’s dismissal
as though it was granted under Rule 12(b)(6). See Petruska v.
Gannon Univ., 462 F.3d 294, 302–03 (3d Cir. 2006) (construing
a Rule 12(b)(1) dismissal as a Rule 12(b)(6) dismissal because

9
jurisdiction was not at issue while the legal sufficiency of the
plaintiff’s claims was).

We have appellate jurisdiction over district courts’ final
decisions under 28 U.S.C. § 1291. Our standard of review over
(what we are construing as) the District Court’s dimissal for
failure to state a claim is plenary. Frederico v. Home Depot,
507 F.3d 188, 199 (3d Cir. 2007).

When considering a district court’s grant of a motion to
dismiss under Rule 12(b)(6), “we accept all factual allegations
in the complaint as true and view them in the light most
favorable to the plaintiff.” Buck v. Hampton Twp. Sch. Dist.,
452 F.3d 256, 260 (3d Cir. 2006). We “determine whether,
under any reasonable reading of the complaint, the plaintiff may
be entitled to relief.” Pinker v. Roche Holdings Ltd., 292 F.3d
361, 374 n.7 (3d Cir. 2002).

In light of the Supreme Court’s decision in Bell Atlantic
Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955 (2007), we
have cautioned that the factual allegations in the complaint must
not be “so undeveloped that it does not provide a defendant the
type of notice of claim which is contemplated by Rule 8.”
Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.
2008). In addition, “it is no longer sufficient to allege mere
elements of a cause of action; instead ‘a complaint must allege
facts suggestive of [the proscribed] conduct.’ ” Id. (alteration in
original) (quoting Twombly, 127 S. Ct. at 1969 n.8). Moreover,

10
we have interpreted Twombly’s emphasis on “plausibility” to
mean that the complaint’s “ ‘[f]actual allegations must be
enough to raise a right to relief above the speculative level.’ ”
Id. at 234 (quoting Twombly, 127 S. Ct. at 1965).

Despite these new contours, after Twombly we adhere to
the familiar statements of our standard of review, quoted above
from Buck, 452 F.3d at 260, and Pinker, 292 F.3d at 374 n.7.
We accept the complaint’s allegations as true, read those
allegations in the light most favorable to the plaintiff, and
determine whether a reasonable reading indicates that relief may
be warranted. See Phillips, 515 F.3d at 233 (stating that the
above-quoted language from Pinker describing the standard of
review remains “acceptable” after Twombly).

III. Classification as an Independent Contractor: 2000–03

Umland alleges that PLANCO wrongly classified her and
other Regional Marketing Directors as independent contractors
during the 2000–03 period. As a result of this classification, she
owed 15.3 percent of her income from PLANCO in SECA tax.
See 26 U.S.C. § 1401. If she had been classified as an
employee, by contrast, she would have paid only 7.65 percent of
her salary in employee FICA tax. See id. § 3101.7 PLANCO

7
If Umland had been classified as an employee, PLANCO,
as noted above, would have owed a separate 7.65 percent of her
salary under the employer FICA tax. 26 U.S.C. § 3111.

11
contends, among other defenses, that federal law preempts
Umland’s state-law claims for breach of contract and unjust
enrichment.

“ ‘[S]tate law is pre-empted to the extent that it actually
conflicts with federal law. Thus, the Court has found
pre-emption . . . where state law stands as an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress.’ ” Fasano v. Fed. Reserve Bank of N.Y.,
457 F.3d 274, 280 (3d Cir. 2006) (quoting English v. Gen. Elec.
Co., 496 U.S. 72, 79 (1990)). Interference with a
comprehensive administrative scheme is one way that state law
might impede Congress’s goals. See, e.g., C.E.R. 1988, Inc. v.
Aetna Cas. & Sur. Co., 386 F.3d 263, 265 (3d Cir. 2004)
(deciding “whether the National Flood Insurance Program . . .
is sufficiently comprehensive to preempt a state tort suit arising
from conduct related to the Program's administration”). In our
case, PLANCO points to the Internal Revenue Service’s
administrative process that allows an employee, by filing an IRS
Form SS-8, to request that the IRS determine whether she is an
employee or an independent contractor. See IRS, Form SS-8:
Determination of Worker Status for Purposes of Federal
Employment Taxes and Income Tax Withholding, OMB No.
1 5 4 5 - 0 0 0 4 ( 2 0 0 6 ) , a v a il a b l e a t
http://www.irs.gov/pub/irs-pdf/fss8.pdf (last visited Aug. 8,
2008) [hereinafter “IRS Form SS-8”]. For reasons not in the
record (and not known to counsel at oral argument), Umland did
not file a form SS-8. She could also have filed an administrative

12
claim for a refund of self-employment taxes pursuant to 26
U.S.C. § 6511(a), or a tax refund suit against the Government
under 28 U.S.C. § 1346.

The Court of Appeals for the Eleventh Circuit has noted
that “Congress has established a comprehensive regulatory
scheme” for resolving disputes over proper classification of
employees and independent contractors. McDonald, 291 F.3d
at 725. The Court stated this as support for its holding that
Congress did not intend for FICA to create a private right of
action. But the existence of federal administrative remedies for
the alleged misclassification as independent contractor,
established by Congress, also suggests that Congress intended
the administrative remedies to preempt state-law claims.
Several district courts have found preemption in this context.
See, e.g. McElwee v. Wharton, 19 F. Supp. 2d 766, 771 (W.D.
Mich. 1998) (“In light of the available legal remedies, there is
no need to recognize an equitable right for restitution as to
federal employment taxes.”).

We agree with PLANCO that permitting Umland’s suit
to proceed with respect to the 2000–03 damages she allegedly
experienced would interfere with the IRS’s administrative
scheme for handling such disputes. See IRS Form SS-8; see
also Treas. Reg. § 31.3121(d)-1 (defining employees for
purposes of FICA); IRS, Internal Revenue Manual, pt. 4, ch. 23,
§ 6 ( 2 0 0 3 ) , a v a i l a b l e a t
http://www.irs.gov/irm/part4/ch21s07.html (last visited Aug. 20,

13
2008) (describing the “Classification Settlement Program”).
Individuals would have less incentive to follow IRS procedures
if they could simply bring common-law claims for
misclassification as an independent contractor in state court (or
in federal court sitting in diversity). We therefore hold
preempted by IRS regulations state-law claims for damages
based on classification as an independent contractor rather than
an employee. See Fidelity Fed. Savs. & Loan Ass’n v. de la
Cuesta, 458 U.S. 141, 153 (1982) (“Federal regulations have no
less pre-emptive effect than federal statutes.”). To the extent
that dismissal of Umland’s claims applied to the 2000–03
damages, we affirm the District Court’s judgment dismissing
those claims.

IV. Withholding of Employer Share of FICA Taxes:
2004–05

Umland also alleges that she experienced damages after
being reclassified as an employee. Specifically, she
alleges—and we must assume it to be true under our standard of
review—that PLANCO withheld from her 2004–05 paychecks
both the 7.65 percent employee FICA tax of 26 U.S.C. § 3101
and the 7.65 percent employer FICA tax of 26 U.S.C. § 3111.

A. Breach of Contract Claims

Umland brought two breach-of-contract claims based on
“implied terms” of her employment contract. The first is based

14
on FICA, 26 U.S.C. § 3111. The second is based on 34 Pa.
Code § 9.1(13), which prohibits unauthorized deductions, but
relates back to the alleged violation of FICA to allege that no
law authorized the withholding of an additional 7.65 percent of
Umland’s salary. To bring these statutes into play for her
contract claims, Umland appears to rely on the following
principle of contract interpretation:

Laws which subsist at the time and
place of the making of a contract,
and where it is to be performed,
enter into and form a part of it, as
fully as if they had been expressly
referred to or incorporated in its
terms. This principle embraces
alike those laws which affect its
construction and those which affect
its enforcement or discharge.

Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass’n, 499 U.S.
117, 130 (1991) (quoting Farmers & Merchs. Bank of Monroe
v. Fed. Reserve Bank of Richmond, 262 U.S. 649, 660 (1923)).
Umland contends that because she has alleged that PLANCO
violated both § 3111 and § 9.1(13), she has sufficiently alleged
that PLANCO breached her employment contract.

An initial problem is that Umland does not cite any
authority applying this broad canon of construction to allow a

15
state-law claim based on a violation of federal tax law. We
decline to apply such a broad principle to this tax-withholding
context, as doing so here would trump the standard inquiry
whether a federal statute creates a private right of action.
PLANCO contends, and we agree with respect to Umland’s
breach-of-contract claims, that Umland’s complaint attempts to
use state common law to circumvent the absence of a private
right of action under FICA.

The Supreme Court has specified four factors used to
determine whether a federal statute creates a private right of
action: (1) whether the statute was enacted for the benefit of the
plaintiff; (2) indication of legislative intent to create a private
remedy; (3) consistency with the purposes of the legislative
scheme; and (4) whether the cause of action would traditionally
come under state law. Cort v. Ash, 422 U.S. 66, 78 (1975). In
subsequent private-right-of-action cases, the Supreme Court has
clarified that the “ ‘central inquiry’ ” is “ ‘whether Congress
intended to create, either expressly or by implication, a private
cause of action.’ ” McDonald, 291 F.3d. at 723 (quoting Touche
Ross & Co. v. Redington, 422 U.S. 560, 575 (1979)); see also
Gonzaga Univ. v. Doe, 536 U.S. 273, 286 (2002) (focusing on
congressional intent as evidenced by statutory text); Alexander
v. Sandoval, 532 U.S. 275, 286–87 (2001) (same); cf. Thompson
v. Thompson, 484 U.S. 174, 179–80 (1988) (focusing on
congressional intent but looking more broadly to legislative
history and allowing that private rights of action could be
implied rather than explicit).

16
 Our Court has not previously decided whether FICA
creates a private right of action. But our sister Court of Appeals
for the Eleventh Circuit has analyzed the question in detail.
That Court stated in McDonald that FICA is a tax-raising statute
rather than a benefit-conferring statute, resolving factor (1)
against the plaintiff. 291 F.3d at 723. Under factor (2), the
Court stated that “the legislative history is completely devoid”
of any intention to create a private right of action under FICA.
Id. at 724. Finally, in reasoning that echoes preemption
analysis, it wrote in its analysis of factor (3) that a private right
of action would undermine the IRS’s administrative procedures.
Id. at 725. In addition, many district courts have held that FICA
did not create a private right of action. See Powell v. Carey
Int’l, Inc., 514 F. Supp. 2d. 1302, 1323–24 (S.D. Fla. 2007)
(following McDonald in response to plaintiff’s claim apparently
based solely on FICA); Paukstis v. Kenwood Golf & Country
Club, Inc., 241 F. Supp. 2d 551, 560–61 (D. Md. 2003)
(rejecting claim for employer’s failure to pay retirement and
medicare taxes brought under FICA itself); White v. White Rose
Food, 62 F. Supp. 2d. 878, 887–88 (E.D.N.Y. 1999) (rejecting
claims brought under FICA and other federal statutes); Salazar
v. Brown, 940 F. Supp. 160, 164–65 (W.D. Mich. 1996)
(rejecting FICA claim); DiGiovanni v. City of Rochester, 680 F.
Supp. 80, 82–83 (W.D.N.Y. 1988) (holding that no federal cause
of action exists under withholding statutes and declining to
exercise pendent jurisdiction over the plaintiff’s state-law
claims).

17
 We agree with the analysis of these courts that FICA does
not create a private right of action. Moreover, if we were to
read FICA’s provisions into every employment contract, we
would contradict Congress’s decision not to include expressly
a private right of action and our belief that Congress did not
intend to imply a private right of action either. Because both
breach-of-contract claims at root allege FICA violations, we
affirm the District Court’s dismissal of Umland’s breach-of-
contract claims with respect to 2004–05 as well.

B. Unjust Enrichment Claim

Umland claims that PLANCO unjustly enriched itself in
2004–05 by withholding an extra 7.65 percent of Umland’s
salary, and the salaries of other class members, beyond the 7.65
percent they owed in employee FICA tax. According to the
allegations in her complaint, Umland paid a total of 15.3 percent
of her salary in FICA taxes—the same percentage she had been
paying under SECA during 2000–03 when she was classified as
an independent contractor. She alleges that PLANCO used the
excess 7.65 percent to pay its employer FICA tax, reaping a
benefit by avoiding the burden of that tax.

PLANCO describes the alleged withholding of an extra
7.65 percent of Umland’s salary (above and beyond the 7.65
percent rightfully withheld for the employee FICA tax) as an
overpayment of the employee FICA tax. We take this to mean
that PLANCO views its actions as akin to a clerical mistake.

18
PLANCO’s characterization would place Umland’s claim
squarely within the scope of 26 U.S.C. § 7422(a), which places
restrictions on tax-refund lawsuits and preempts state-law
claims:

No suit or proceeding shall be
maintained in any court for the
recovery of any internal revenue tax
alleged to have been erroneously or
illegally assessed or collected, or of
any penalty claimed to have been
collected without authority, or of
any sum alleged to have been
excessive or in any manner
wrongfully collected, until a claim
for refund or credit has been duly
filed with the Secretary [of the
Treasury], according to the
provisions of law in that regard,
and the regulations of the Secretary
established in pursuance thereof.

Id. For example, the United States Court of Appeals for the
Fifth Circuit has held that § 7422 preempts state-law claims
against airlines that collected excise taxes on transportation
under an expired statute that Congress unexpectedly declined to

19
renew. Sigmon v. Southwest Airlines Co., 110 F.3d 1200, 1204
(5th Cir. 1997).8

For her part, Umland calls the alleged withholding of an
additional 7.65 percent an illegal assessment of the employer
FICA tax on the wrong people. She cites Kaucky v. Southwest
Airlines Co., 109 F.3d 349, 350–51 (7th Cir. 1991), which
involved the same excise tax on transportation at issue in
Sigmon and Brennan. In a dictum, the Court of Appeals for the
Seventh Circuit assumed that a taxpayer suit could proceed
under state law if the defendant who collected the allegedly
invalid tax was either (1) a “con man” or (2) an authorized agent
of the IRS who “turns dishonest” and acts in bad faith. Id. at
352–53. In other words, Umland argues that—unlike the
defendant airlines in Sigmon, Brennan, and Kaucky—PLANCO
lacked “colorable authority” to withhold an additional 7.65

8
Applying similar reasoning, the Court of Appeals for the
Ninth Circuit has held that state-law claims like those at issue in
Sigmon arose under § 7422 and were properly removed to
federal court. See Brennan v. Southwest Airlines Co., 134 F.3d
1405, 1410 (9th Cir. 1998) (“The statute makes clear . . . that a
suit to recover either a ‘tax’ or a ‘sum’ constitutes a suit for a tax
refund.”). In that case, the Court did not analyze the issue as
one of preemption. But, reaching what amounts to the same
result as Sigmon, the Court dismissed the claims because the
plaintiffs had not exhausted their administrative remedies, which
§ 7422 requires, and had sued the wrong party (i.e., the airlines
rather than the Government, as § 7422 requires). Id. at 1412.

20
percent from her paycheck, id. at 352, because the employer
FICA tax is an excise tax levied on employers, see 26 U.S.C.
§ 3111.

But even under Umland’s characterization, we think her
unjust enrichment claim amounts to an allegation that the
amount of PLANCO’s employer FICA tax was “wrongfully
collected” from her. As the Court in Brennan pointed out,
Ҥ 7422 applies to any suit for any sum wrongfully collected in
any manner.” 134 F.3d at 1410 n.7 (emphasis in original). As
the Supreme Court has recently remarked with regard to § 7422:
“Five ‘any’s’ in one sentence [there were two more than the
three noted above] and it begins to seem that Congress meant
the statute to have expansive reach.” See U.S. v. Clintwood
Elkhorn Mining Co., ___ U.S. ___, 128 S. Ct. 1511, 1516 (2008)
(holding that claims for a refund of invalid export tax brought
under a statute other than § 7422 were barred).9 Instead of
directing courts to characterize the nature of the tax
collector—locating it on a spectrum from authorized agent
acting in good faith, to once-authorized agent acting in bad faith,
to “con man,” Kaucky, 109 F.3d at 352—we think § 7422
requires taxpayers to file claims with the IRS for tax refunds.

9
Although our case contrasts with Clintwood because the
taxpayers there sought a refund from the Government, see id.,
PLANCO is still a “collector” of employment taxes, see Kaucky,
109 F.3d at 351(stating that “the firm corresponds to an
employee of the [IRS]”).

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We thus hold that § 7422 expressly preempts Umland’s unjust
enrichment claim. This result protects the integrity of the
administrative scheme for tax refunds that Congress has
approved and that the IRS has implemented. See Brennan, 134
F.3d at 1411 (describing the policy rationales for this result).10

Umland argues that PLANCO received the benefit from
the 7.65 percent wrongfully collected for her, and thus any
repayment must come from PLANCO, not the Government. But
the sum of money at issue is a tax, i.e., the employer FICA tax
that PLANCO owed to the Government. Umland alleges that
the amount withheld from her paycheck was excessive, and that
the 7.65 percent at issue was wrongfully collected from her.
These allegations track the language of § 7422. That statute
required Umland to seek a refund from the IRS, which would in
turn seek to collect the employer FICA tax due from PLANCO.
Moreover, even if we did not hold that the language of § 7422
expressly preempted Umland’s claim, the broad sweep of

10
Umland points out Mikulski v. Centerior Energy Corp.,
501 F.3d 555, 574 (6th Cir. 2007) (en banc) (holding that the
District Court lacked jurisdiction over shareholders’ claims for
overreporting of dividends), for the propositions that she was
not required to exhaust her administrative remedies before filing
suit and that § 7422 does not preempt her claim. We distinguish
Mikulski from our case because, unlike PLANCO, the employer
“did not collect or withhold any taxes” and “was not acting as a
collection agent for or on behalf of the IRS.” Id. at 565.

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§ 7422—especially as described by the Supreme Court, see
Clintwood, 128 S. Ct. at 1516—suggests that Congress intended
the IRS to occupy the field of tax refunds, preempting claims
such as Umland’s.

Finally, dismissal for failure to state a claim is
appropriate in this case because Umland’s complaint has not
satisfied our pleading requirements in the wake of Twombly.
Because she paid 15.3 percent of her salary before and after
reclassification, becoming an employee left her with the same
after-tax income as before (assuming her salary did not change
on January 1, 2004, which she does not allege it did).11 For
Umland’s claim to amount to unjust enrichment, she relies
implicitly on the allegation that her reclassification as an
employee should have resulted in an increase of her salary, after
taxes, of 7.65 percent. Yet she does not allege any facts that
reflect the contours of the new agreement between her and
PLANCO that began in January 2004 when she was reclassified
as an employee. Specifically, she does not explain whether the
new agreement was meant to increase her after-tax income.

In addition, Umland’s complaint does not explicitly
allege that her paychecks reflected two separate amounts

11
During 2000–03, Umland was entitled to deduct one-half
the SECA tax. See 26 U.S.C. § 1402(a)(12). For simplicitly,
our discussion in this paragraph does not adjust for this
complication.

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withheld—one corresponding to the employee FICA tax, and
another to the employer FICA tax. The complaint states only
that PLANCO required Umland “to pay PLANCO’s employer’s
share of the FICA tax.” Complaint ¶ 92. Yet the success of her
unjust enrichment claim depends in part on her avoiding
PLANCO’s characterization of the FICA taxes withheld from
her paychecks as akin to an overpayment, i.e., a single sum paid
in excess of what she owed. Her complaint leaves a reader to
guess as to how PLANCO effected the additional 7.65 percent
of withholding and how that action was reflected on her
paychecks. In this context, her complaint needs to allege more
facts “to raise a right to relief above the speculative level.”
Phillips, 515 F.3d at 234 (quoting Twombly, 127 S. Ct. at 1965).
Umland filed her complaint before the Supreme Court decided
Twombly. Ordinarily, we would grant her leave to amend on
this issue. Because we hold that § 7422 preempts Umland’s
unjust enrichment claim, remand here is unnecessary.

* * * * *

For these reasons, the judgment of the District Court is
affirmed.

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