Kim v. United States

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 12, 2010 Decided January 21, 2011

No. 09-5227

CALVIN KI SUN KIM AND CHUN CHA KIM,
APPELLANTS

v.

UNITED STATES OF AMERICA, ET AL.,
APPELLEES

Appeal from the United States District Court
for the District of Columbia
(No. 1:08-cv-01660)

Joseph Peter Drennan argued the cause for appellants.

Calvin K. Kim and Chun C. Kim, appearing pro se, filed
briefs.

Gretchen M. Wolfinger, Attorney, U.S. Department of
Justice, argued the cause for appellees. With her on the brief
were Jonathan S. Cohen. R. Craig Lawrence, Assistant U.S.
Attorney, entered an appearance.
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Before: BROWN and GRIFFITH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge: For the Kims, like many
income-producing U.S. residents, the tax man cometh, but the
Kims, by taking the offensive and suing the Internal Revenue
Service (IRS), have been unusually unwelcoming. Calvin Ki
Sun Kim and Chun Cha Kim are tax protesters who, in an
action for unspecified damages, allege the IRS violated the
Taxpayer Bill of Rights, failed to comply with various statutes,
and perpetrated an “ongoing campaign of harassment by
correspondence.” Compl. at 6. The Kims’ lawsuit is one of
many similar actions brought by tax protestors accusing the
IRS of a miscellany of misconduct.

I

From 1998 through 2003, the Kims did not regularly file
tax returns. When they did file, their tax returns did not
include required information. Unsurprisingly, in 2002 the
IRS contacted the Kims about their frivolous or missing
returns. The resulting correspondence between the Kims and
the IRS is the gravamen of this suit.

The Kims insist they are not required to file individual
income tax returns because the IRS did not maintain proper
records or perform all duties required by law. See Compl. at
6–8. Based on these alleged failures, the Kims filed suit in the
United States District Court for the District of Columbia in
September 2008. Their complaint asserted twenty-one
separate counts of wrongdoing against the United States; the
Commissioner of the IRS; IRS employees Dennis Parizek,
Scott Prentky, and A. Chow; and four unknown IRS agents
 3

(collectively “Defendants”). Specifically, the Kims’
complaint alleged “denial of the right to due process of the tax
law, administrative law, and record-keeping law of the United
States,” Compl. at 1, and “disregard of provisions of the tax
law of the United States and regulations promulgated
thereunder,” Compl. at 2. For redress of these claimed
violations, the Kims sought damages pursuant to Bivens v. Six
Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S.
388 (1971), and what is commonly known as the Taxpayer Bill
of Rights, 26 U.S.C. § 7433.1

The district court dismissed Counts 1 through 18—the
Bivens claims—under Federal Rule of Civil Procedure
12(b)(1), holding it lacked jurisdiction to hear the Kims’
claims against the Defendants in their official capacities, and
under Rule 12(b)(6), for failure to state a claim because no
Bivens remedy exists for claims against the Defendants in their
individual capacities. Kim v. United States, 618 F. Supp. 2d
31, 37–40 (D.D.C. 2009). The district court also dismissed
Counts 19 and 20 under Rule 12(b)(1), holding the two counts
did not pertain to “collection activities” within the meaning of
the Taxpayer Bill of Rights. Id. at 41. Alternatively, the
district court dismissed Counts 19 and 20, along with Count
21, under Rule 12(b)(6) because the Kims failed to plead
exhaustion in their complaint and failed to rebut the
government’s exhaustion defense. Id. at 42–43.

We affirm the judgment of the district court with regard to
Counts 1 through 18 because no Bivens claim is available

1
The proper name of the Act is the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. No. 105-206,
§§ 3000–3804, 112 Stat. 685, 726–83 (codified in scattered titles of
the U.S.C.); however, we refer to it by its popular name throughout
this opinion. See Preslar v. Comm’r, 167 F.3d 1323, 1327 n.2 (10th
Cir. 1999).
 4

against the Defendants in their official capacities and no
Bivens remedy is available against the Defendants in their
individual capacities. But we find, contrary to the holding of
the district court, that Counts 19 (relating to liens and levies)
and 20 (failure to provide notice of tax assessment) relate to
“collection activities” under the Taxpayer Bill of Rights and
are therefore within the subject-matter jurisdiction of the
federal courts. That said, we affirm the district court’s
dismissal of Count 19 for lack of subject-matter jurisdiction,
albeit for a different reason. Moreover, the Kims were not
required to plead exhaustion pursuant to the Taxpayer Bill of
Rights in order to survive the Defendants’ motion to dismiss
Counts 20 and 21. We therefore affirm the district court with
respect to Counts 1 through 19, and reverse with respect to
Counts 20 and 21.

We review de novo the district court’s grant of a motion to
dismiss for lack of subject-matter jurisdiction under Rule
12(b)(1), Am. Fed’n of Gov’t Emps., AFL-CIO, Local 446 v.
Nicholson, 475 F.3d 341, 347 (D.C. Cir. 2007), and for failure
to state a claim under Rule 12(b)(6), Atherton v. D.C. Office of
Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009). Because
jurisdiction is a threshold question, see Steel Co. v. Citizens for
a Better Env’t, 523 U.S. 83, 94–95 (1998), we turn first to the
district court’s dismissals under Rule 12(b)(1).

II

A

To the extent the Kims asserted Bivens claims against the
Defendants in their official capacities, the district court
dismissed the claims under Rule 12(b)(1). Kim, 618 F. Supp.
2d at 37–38. It is well established that Bivens remedies do not
exist against officials sued in their official capacities. See
 5

Clark v. Library of Cong., 750 F.2d 89, 103 (D.C. Cir. 1984).
We therefore affirm the district court with respect to its
jurisdictional dismissal of Counts 1 through 18 as against the
Defendants in their official capacities.

B

The district court concluded Counts 19 and 20 were
subject to dismissal under Rule 12(b)(1) for lack of
subject-matter jurisdiction because the challenged conduct was
unrelated to “collection activity” as required by the Taxpayer
Bill of Rights.

The Taxpayer Bill of Rights provides:

If, in connection with any collection of Federal
tax with respect to a taxpayer, any officer or
employee of the Internal Revenue Service
recklessly or intentionally, or by reason of
negligence, disregards any provision of this
title, or any regulation promulgated under this
title, such taxpayer may bring a civil action for
damages against the United States in a district
court of the United States.

26 U.S.C. § 7433(a) (emphasis added). Section 7433 applies
only to collection-related activities. See Miller v. United
States, 66 F.3d 220, 222–23 (9th Cir. 1995) (“[T]he assessment
or tax determination part of the [Internal Revenue Code
enforcement] process is not an act of ‘collection’ and therefore,
not actionable under § 7433.”); Shaw v. United States, 20 F.3d
182, 184 (5th Cir. 1994) (“Section 7433—by its specific
words—allows a taxpayer to sue the government only . . . ‘in
connection with any collection of Federal tax with respect to a
taxpayer’” (quoting 26 U.S.C. § 7433(a))); Gonsalves v. IRS,
 6

975 F.2d 13, 16 (1st Cir. 1992) (per curiam) (holding that a
plaintiff’s claim based on “the government’s refusal to give
him a tax refund runs afoul of the clause in Section 7433 which
says that a taxpayer may sue only if an IRS agent disregards a
statute or regulation ‘in connection with any collection of
Federal tax.’”); see also Rossotti, 317 F.3d at 411 (stating in
dicta, “[t]o be sure, § 7433 provides for a ‘civil action’ only for
damages arising from the ‘collection’ of taxes”).

Count 20 alleges violations of Internal Revenue Code
§ 6303. Section 6303 requires the Secretary to provide a
taxpayer notice of assessment within sixty days of making the
assessment. That notice must “stat[e] the amount [of an
unpaid tax] and demand[] payment . . . .” 26 U.S.C.
§ 6303(a). Section 6303 appears in Chapter 64 of the Internal
Revenue Code, which is aptly entitled “Collection.” This
placement is persuasive. Moreover, we think a demand for
payment is certainly “in connection with any collection of
Federal tax.” That the demand is also a notice of assessment
does not change this conclusion. A tax assessment is
“essentially a bookkeeping notation,” recording a taxpayer’s
liability. Hibbs v. Winn, 542 U.S. 88, 100 (2004) (internal
quotation marks omitted). As such, the assessment serves as a
“trigger” for administrative enforcement efforts such as tax
liens or levies to collect outstanding taxes. Id. at 102. In
contrast, a taxpayer receives a notice of assessment after his
liability is set. The notice of assessment signifies the
beginning of the Commission’s enforcement efforts. Thus,
the notice of assessment, unlike the assessment itself, is a
precursor to the filing of a lien and the execution of a levy.

In addition, § 6303 requires notice of assessment “after the
making of an assessment of a tax pursuant to section 6203.”
26 U.S.C. § 6303. Unlike § 6303, however, § 6203 appears in
the statutory chapter entitled “Assessment” and does not
 7

require prior notice to the taxpayer. See 26 U.S.C. § 6203
(“Upon request of the taxpayer, the Secretary shall furnish the
taxpayer a copy of the record of the assessment.”) Placement
of the provision requiring notice of assessment in the chapter
pertaining to “collection” is not happenstance. It strongly
suggests the notice of assessment referred to in § 6303 pertains
to collections, while those actions authorized under § 6203 do
not. See Miller, 66 F.3d at 222 (“Because the statutory
requirements of ‘notice and demand’ are under § 6303, chapter
64, Collection, ‘notice and demand’ is a collection
procedure.”). Thus, the provision of notice of assessment is a
collection activity. Because Count 20 involves conduct in
connection with collection, the district court improperly
dismissed it for want of subject-matter jurisdiction.

Count 19 alleges violation of 26 U.S.C. § 6301 and the
IRS Restructuring and Reform Act of 1998, which together
require the Commissioner to develop and implement review
and disciplinary procedures for an IRS employee’s decision to
file a notice of lien, levy, or seizure. Pub. L. 105-206, § 3421,
112 Stat. 685, 758. Like § 6303—the statutory section
underlying Count 20—§ 6301 is also located in the IRC
chapter on “Collection.” The text of § 6301 provides, “[t]he
Secretary shall collect the taxes imposed by the internal
revenue laws.” (emphasis added). And the 1998 amendment
to § 6301 added provisions detailing procedures for executing
liens, levies, and seizures on a taxpayer’s property. Pub. L.
105-206, § 3421, 112 Stat. 685, 758. The process of
executing liens, levies, or seizures on property inherently
involves collection activity; the purpose of a lien, levy, or
seizure is to collect assets in exchange for a debt owed.
Accordingly, the procedures described in § 6301 also entail
some collection activities.
 8

But Count 19 suffers from another jurisdictional infirmity.
As counsel conceded at oral argument, the Kims never alleged
they experienced the effects of an improper lien, levy, or
seizure. Or. Arg. Recording at 6:19–52. Thus, they lack the
critical prerequisite of standing. Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560–61 (1992); see Sierra Club v. EPA,
292 F.3d 895, 898–99 (D.C. Cir. 2002). Although counsel
contends the Kims’ failure to allege an injury should be
excused because they proceeded pro se in the district court, Or.
Arg. Recording at 6:52–7:42, we cannot construe their
complaint so liberally. Because there was no indication in the
Kims’ complaint of an injury in the form of an improperly
assessed lien, levy, or seizure—let alone an injury resulting
from the Commissioner’s failure to develop and implement
review and disciplinary procedures for employee decisions to
file a lien, levy, or seizure—the district court was correct in
dismissing Count 19 for lack of subject-matter jurisdiction
under Rule 12(b)(1).

III

Having resolved the jurisdictional issues presented, we
now turn to the dismissals for failure to state a claim.

A

To the extent Counts 1 through 18 were based on the
Kims’ assertion of Bivens claims against the Defendants in
their individual capacities, the district court dismissed these
counts under Rule 12(b)(6), holding no Bivens remedy was
available in light of the comprehensive remedial scheme set
forth by the Internal Revenue Code. Kim, 618 F. Supp. 2d at
38–40. We agree with the district court’s reasoning, see
Wilson v. Libby, 535 F.3d 697, 705–10 (D.C. Cir. 2008)
(discussing Bivens remedy after resolving jurisdictional
 9

questions); Munsell v. Dep’t of Agric., 509 F.3d 572, 591–93
(D.C. Cir. 2007) (same), which is consistent with that of our
sister circuits, see Adams v. Johnson, 355 F.3d 1179, 1185–86
(9th Cir. 2004); Judicial Watch, Inc. v. Rossotti, 317 F.3d 401,
408–13 (4th Cir. 2003); Shreiber v. Mastrogiovanni, 214 F.3d
148, 152–53 (3d Cir. 2000); Fishburn v. Brown, 125 F.3d 979,
982–83 (6th Cir. 1997); Vennes v. An Unknown No. of
Unidentified Agents of the U.S., 26 F.3d 1448, 1453–54 (8th
Cir. 1994); McMillen v. U.S. Dep’t of Treasury, 960 F.2d 187,
190–91 (1st Cir. 1991) (per curiam); Nat’l Commodity &
Barter Ass’n, Nat’l Commodity Exch. v. Gibbs, 886 F.2d 1240,
1247–48 (10th Cir. 1989); Baddour, Inc. v. United States, 802
F.2d 801, 807–09 (5th Cir. 1986); Cameron v. IRS, 773 F.2d
126, 129 (7th Cir. 1985). We therefore affirm the district
court’s dismissal of Counts 1 through 18 for failure to state a
claim.

B

We now turn to the district court’s dismissal of Counts 20
and 21 under Rule 12(b)(6). The Kims contend the district
court erred because under Jones v. Bock, 549 U.S. 199 (2007),
exhaustion of statutory remedies is not a pleading requirement
of the Taxpayer Bill of Rights. We agree.

In Jones v. Bock, prisoner Lorenzo Jones filed suit under
42 U.S.C. § 1983 claiming prison officials displayed deliberate
indifference to his medical needs. 549 U.S. at 207–08.
Because Jones was a prisoner at the time of his suit, he was
required to exhaust prison grievance procedures under the
Prison Litigation Reform Act (“PLRA”) before filing suit. Id.
at 202 (citing 28 U.S.C. § 1915A; 42 U.S.C. § 1997e(a)). The
district court dismissed Jones’s suit and the Sixth Circuit
affirmed, each concluding Jones failed to exhaust under the
PLRA. Id. at 208–09. The Supreme Court reversed, holding
 10

the lower courts’ contrary conclusion “lack[ed] a textual basis
in the PLRA,” because nothing in the PLRA required Jones to
plead exhaustion. Id. at 217 (“Given that the PLRA does not
itself require plaintiffs to plead exhaustion, such a result ‘must
be obtained by the process of amending the Federal Rules, and
not by judicial interpretation.’” (quoting Leatherman v.
Tarrant Cnty. Narcotics Intelligence & Coordination Unit,
507 U.S. 163, 168 (1993))).

In pertinent part, the PLRA “provides that ‘[n]o action
shall be brought’ unless administrative procedures are
exhausted.” Id. at 220 (quoting 42 U.S.C. § 1997e(a))
(alteration in original). The Court read “no action shall be
brought” as boilerplate, often used as prefatory phrasing
without “lead[ing] to the dismissal of an entire action.” Id.
In a similar vein, the Court described the PLRA’s language
authorizing dismissal of an action for “fail[ure] to state a claim
upon which relief may be granted” as a “red herring,” id. at 215
(citing 28 U.S.C. §§ 1915A(b)(1), 1915(e)(2)(B); 42 U.S.C.
§ 1997e(c)(1) (alteration in original)), because “[d]etermining
that Congress meant to include failure to exhaust under the
rubric of ‘failure to state a claim’ in the screening provisions of
the PLRA would . . . not support treating exhaustion as a
pleading requirement rather than an affirmative defense,” id.

Jones’s focus on the text of the PLRA is instructive here.
Section 7433 of the Taxpayer Bill of Rights provides that “[a]
judgment for damages shall not be awarded . . . unless . . . the
plaintiff has exhausted the administrative remedies
available . . . .” 26 U.S.C § 7433(d)(1). As the Court in
Jones read the phrase “no action shall be brought,” we read the
phrase “a judgment for damages shall not be awarded” as
boilerplate. Nothing in the text of § 7433 “support[s] treating
exhaustion as a pleading requirement rather than an affirmative
defense.” Jones, 549 U.S. at 215. If anything, the language
 11

in the PLRA would have been a better candidate for a statutory
pleading requirement as it mandated “no action” shall be
brought, while § 7433 mandates “no judgment” shall be
awarded.

In dismissing Claims 20 and 21, the district court held the
Kims’ failure to exhaust appeared on the face of the complaint
and therefore, under Jones, the complaint was subject to
dismissal under Rule 12(b)(6). In support, the district court
pointed to the Supreme Court’s quotation in Jones of a Third
Circuit case stating that “‘a complaint may be subject to
dismissal under Rule 12(b)(6) when an affirmative
defense . . . appears on its face.’” Id. (quoting Leveto v.
Lapina, 258 F.3d 156, 161 (3d Cir. 2001) (alteration in
original)). Thus, the parties’ briefing and oral argument
focused on whether the Kims’ alleged failure to exhaust
appeared on the face of their complaint.

It is evident to us that the Kims’ alleged failure to exhaust
did not appear on the face of the complaint. As the Jones Court
explains, “[w]hether a particular ground for opposing a claim
may be the basis for dismissal for failure to state a claim
depends on whether the allegations in the complaint suffice to
establish that ground, not on the nature of the ground in the
abstract.” Id.; cf. Thompson v. DEA, 492 F.3d 428, 438 (D.C.
Cir. 2007) (“Further, even when failure to exhaust is treated as
an affirmative defense, it may be invoked in a Rule 12(b)(6)
motion if the complaint somehow reveals the exhaustion
defense on its face.”). Thus, when a statute does not explicitly
require a plaintiff to plead exhaustion, Jones rejects a
categorical rule in favor of an analysis of the complaint. “If
the allegations, for example, show that relief is barred by the
applicable statute of limitations, the complaint is subject to
dismissal for failure to state a claim . . . .” Id. Exhaustion in
this case is not comparable to a statute of limitations defense in
 12

which the allegations demonstrate both the time an action
accrues and the time in which the suit was filed. Rather, to
discern whether the Kims exhausted, the district court
inevitably had to go beyond the face of the complaint and
conduct further inquiry. See generally 5 CHARLES ALAN
WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE &
PROCEDURE § 1277 (3d ed. 2004).

District courts may refer to materials outside the pleadings
in resolving a 12(b)(6) motion. But when they do, they must
also convert the motion to dismiss into one for summary
judgment. Fed. R. Civ. P. 12(d); see also Wiley v. Glassman,
511 F.3d 151, 160 (D.C. Cir. 2007); WRIGHT & MILLER
§ 1277. In converting the motion, district courts must provide
the parties with notice and an opportunity to present evidence
in support of their respective positions. Fed. R. Civ. P. 12(d),
56; see also Glassman, 511 F.3d at 160–61; WRIGHT &
MILLER § 1277. Failure to present evidence of exhaustion at
that junction would be fatal to the claim.

Because exhaustion is not a pleading requirement under
the Taxpayer Bill of Rights, the Kims were free to omit
exhaustion from their pleadings. And since the Kims did omit
it from their pleadings, the district court necessarily was
required to consider matters outside the pleadings to determine
the validity of the Defendants’ affirmative defense. It is true
that the Kims’ response to the motion to dismiss could have
resolved the question. It is equally true that recalcitrance has
been the Kims’ primary litigation strategy. But a motion to
dismiss may not compel full disclosure concerning efforts to
exhaust; a summary judgment motion would.

In sum, we remand to the district court with instructions to
provide the Kims the procedural safeguards mandated by Rule
12(d) and Rule 56 prior to converting a motion to dismiss to a
 13

motion for summary judgment. At that point, the Kims will
have been provided sufficient notice and opportunity, and any
continued recalcitrance will find no comparable procedural
safe haven. We note that because the district court’s dismissal
under Rule 12(b)(6) was in error, we need not reach the Kims’
contention that 26 C.F.R. § 301.7433-1 is an interpretive
regulation.

IV

We affirm the district court’s order insofar as it dismissed
Counts 1 through 18 for want of subject-matter jurisdiction
under Rule 12(b)(1) because no Bivens claim exists against the
Defendants in their official capacities, and under Rule 12(b)(6)
because no Bivens remedy exists against the Defendants in
their individual capacities. We also affirm the district court’s
dismissal of Claim 19 under Rule 12(b)(1) because the Kims
lack standing. We reverse the district court, however, to the
extent it dismissed Count 20 as unrelated to “collection
activity” under the Taxpayer Bill of Rights, and Counts 20 and
21 for failure to state a claim under Rule 12(b)(6) because the
Kims were not required to plead exhaustion under the
Taxpayer Bill of Rights. We therefore remand for further
proceedings consistent with this opinion.

So ordered.