United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER DENYING DEFENDANT'S RENEWED
MOTION TO DISMISS (ECF NO. 31) AND PLAINTIFF'S MOTION FOR
INJUNCTION (ECF NO. 23)
GEORGE
CARAM STEEH UNITED STATES DISTRICT JUDGE
Before
the court is Defendant's renewed motion to dismiss and
Plaintiff's motion for injunction of levy, which have
been fully briefed. The court heard oral argument on October
10, 2019, and took the matter under advisement. For the
reasons explained below, both motions are denied.
BACKGROUND
FACTS
This is
a wrongful levy action brought pursuant to 26 U.S.C. §
7426(a)(1). The court initially granted Defendant's
motion to dismiss on statute of limitations grounds; the
Sixth Circuit reversed and remanded for further proceedings.
Gold Forever Music, Inc. v. United States, 920 F.3d
1096 (6th Cir. 2019). After the mandate was issued, Defendant
filed a renewed motion to dismiss and Plaintiff filed a
motion to enjoin the levy during the pendency of the case.
Plaintiff
Gold Forever Music, Inc., is a music publishing company owned
by Edward Holland, Jr., a Motown artist who has co-written
songs such as “You Can't Hurry Love” and
“Stop in the Name of Love” by the Supremes. Gold
Forever's catalog includes songs by Holland and other
artists. Gold Forever is entitled to royalties when the works
in its catalog are sold or performed. Rather than directly
licensing its music to third parties, Gold Forever contracts
with Broadcast Music, Inc. and Universal Music Publishing to
do so. These companies license others to use Gold
Forever's music, collect royalties pursuant to those
agreements, and remit the royalties to Gold Forever.
Holland
owes the Internal Revenue Service approximately $20 million
in taxes, interest, and penalties. In an attempt to collect
Holland's tax debt, the IRS served notices of levy on BMI
and Universal on August 27, 2012. The notices required BMI
and Universal to turn over “property and rights to
property . . . that you have or which you are already
obligated to pay” to Gold Forever. The IRS alleges that
Gold Forever is the alter ego of Holland.
The
first payment made by BMI and Universal to the IRS in
response to the notices of levy was $119, 160.37 on October
10, 2013. Additional payments were made from October 6, 2016,
to July 26, 2017, in the amount of $967, 140.76. Gold Forever
seeks the return of the funds remitted in 2016 and 2017,
which it contends were wrongfully levied. Gold Forever argues
that it is not the alter ego of Edward Holland and that most
royalties owed to Gold Forever belonged to artists other than
Holland.
Gold
Forever filed this action on December 6, 2017. The government
moved to dismiss on statute of limitations grounds. Finding
that the nine-month statute of limitations began to run when
the notices of levy were served in 2012, the court dismissed
the action as untimely. The Sixth Circuit reversed, noting
that “[a]lthough the district court was correct that
service of the notice of levy can start the statute of
limitations running for intangible property, it is necessary
for the notice of levy to attach to the property
that is the subject of the wrongful levy action before the
statute can run.” Gold Forever, 920 F.3d at
1102 (emphasis in original). The record did not contain
sufficient information to determine whether Gold
Forever's right to receive future royalties was attached
by the 2012 levies. Assuming that the 2012 levies did not
attach future payments, the Sixth Circuit held that the court
should have drawn a factual inference in Gold Forever's
favor that “the earliest the statute of limitations
could have begun running on Gold Forever's claim was when
the IRS seized Gold Forever's funds held by BMI and
Universal. . . . Therefore, the district court should have
concluded that, on the face of the complaint, this case was
properly filed within the statute of limitations.”
Id.
LAW
AND ANALYSIS
I.
Defendant's Renewed Motion to Dismiss
The
government has renewed its motion to dismiss on statute of
limitations grounds, alleging that additional facts that were
not before the Sixth Circuit warrant dismissal. See
Fed. R. Civ. P. 12(b)(1), 12(b)(6); Miller v. United
States, 838 F.Supp. 338, 339 (N.D. Ohio 1993)
(compliance with statute of limitations in suit against the
United States a “jurisdictional prerequisite”);
Ohio Nat. Life Ins. Co. v. United States, 922 F.2d
320, 324 (6th Cir. 1990) (statute of limitations for suit by
taxpayer for refund is jurisdictional).
In
collecting delinquent taxes, the IRS has the power to levy
the taxpayer's property, even if that property is under
the control of a third party. See 26 U.S.C.
§§ 6331, 6332. When the taxpayer's property is
held by another, the IRS serves a notice of levy pursuant to
26 U.S.C. § 6332(a). “The third party must comply
with the levy demand even if it or any other party claims an
interest in the levied property.” Gold
Forever, 920 F.3d at 1098. Any person other than the
taxpayer who claims an interest in the levied property may
pursue a wrongful levy action against the United States under
26 U.S.C § 7426(a). An action under § 7426(a) is
“the exclusive remedy for an innocent third party whose
property is confiscated by the IRS to satisfy another
person's tax liability.” Id. (citation
omitted).
At all
times relevant here, the statute of limitations for a
wrongful levy action was nine months “from the date of
the levy or agreement giving rise to such action.” 26
U.S.C. § 6532(c)(1) (2017).[1] A request for the return of
levied property under 26 U.S.C. § 6343, made within the
nine-month limitations period, extends the limitations period
by twelve months. 26 U.S.C. § 6532(c)(2) (2017).
“When the property or obligation levied on is
intangible, we have held that the notice of levy qualifies as
the ‘date of the levy' sufficient to start running
the statute of limitations for a wrongful levy action.”
Gold Forever, 920 F.3d at 1099 (citation omitted).
This
court initially held that the date of the levies was August
27, 2012, the date that the notices of levy were served on
BMI and Universal. The court found Gold Forever's suit to
be untimely because it was filed more than nine months after
August 27, 2012. As the Sixth Circuit noted, however, a levy
may “extend only to property possessed and obligations
existing at the time thereof.” Id. (quoting 26
U.S.C. § 6331(b)). A levy does not reach property
acquired after the date of the levy; the levy must
“attach” to existing property or obligations for
the statute of limitations to begin running. Id. at
1102. The ...