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December 11, 1991


The opinion of the court was delivered by: Stewart, District Judge:


Plaintiffs Martin Greenhouse and Sherry Greenhouse brought this action seeking relief from defendant's efforts to collect sums of money allegedly due on plaintiff's tax returns for the years 1982, 1986, 1987, and 1988. Defendants are the Manhattan District Director of the United States Internal Revenue Service ("IRS"), the Chief of the Collection Division of the IRS, and an agent of the Collection Department of the IRS, Anselmo Estwick (hereinafter "the government.") In claims one through five of their Amended and Supplementary Complaint ("amended complaint"), plaintiffs seek declaratory and injunctive relief with respect to the aforementioned tax liabilities.*fn1

Presently before the Court is defendant's motion, pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the first five claims in the amended complaint*fn2 for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. Also before the Court is a cross-motion for an order granting judgment to the plaintiffs.*fn3 The Court also considers defendant's motion, pursuant to Rule 11 of the Federal Rules of Civil Procedure, for the imposition of sanctions against plaintiffs, Martin and Sherry Greenhouse, and their attorney, Herbert G. Feinson.


This case deals with plaintiffs' problems in paying taxes owed for the years 1982, 1986, 1987, and 1988. Defendant IRS assessed plaintiffs for underpaid taxes, penalties and interest. Although plaintiffs made several payments over a period of time, the IRS claims that the plaintiffs still owed a significant amount of money and therefore filed a federal tax lien on November 21, 1989. The IRS also proceeded to collect the money by levy against plaintiffs' business.

In light of the fact that the complaint at issue represents the plaintiffs' third attempt to invoke this Court's jurisdiction in granting equitable relief, it is necessary to briefly state the procedural history of this case. On April 27, 1990, plaintiffs filed their initial complaint in this action. The complaint alleged that the IRS filed a false Notice of Tax Lien; that the taxpayer paid $30,000.00 between June and December 1989 sufficient to pay the amount due plus the interest provided by the IRS; and that the IRS applied over $10,000.00 to illegal penalties and interest. Compl. Greenhouse v. United States, 90 Civ. 2844. By Order to Show Cause dated April 30, 1990, plaintiff sought a temporary restraining order and preliminary injunction enjoining the Government from their collection efforts. A hearing was conducted on May 10, 1990. On May 15, 1990, this Court issued a Memorandum Decision vacating the April 30, 1990 temporary restraining order, denying plaintiffs' motion for a preliminary injunction and denying plaintiffs' request for an order for the release of the tax liens. Greenhouse v. United States, 738 F. Supp. 709, 710 (S.D.N.Y. 1990). This Court found that the Anti-Injunction Act, 26 U.S.C. § 7421(a) (hereinafter "Section 7421" or "the Anti-Injunction Act"), which prohibits a suit for the purpose of restraining the assessment or collection of any tax*fn4, was applicable and, absent the application of any exceptions to the Anti-Injunction Act, deprived this Court of subject matter jurisdiction over the case. Greenhouse, 738 F. Supp. at 712. We analyzed the case in light of the exception to the prohibition of injunctions on the assessment or collection of taxes articulated in Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), under which a two-pronged test must be satisfied: first, it must be clear that under no circumstances could the government prevail given the facts available and the most liberal view of the law; and second, that equity jurisdiction must otherwise exist. Greenhouse, 738 F. Supp. at 712 (citing Enochs, 370 U.S. at 7, 82 S.Ct. at 1129). Short of satisfying the Enochs test, a plaintiff taxpayer must abide by the full payment rule under which "a federal court has jurisdiction over a tax refund suit only after the taxpayer has made full payment of the assessment, including penalties and interest." Greenhouse, 738 F. Supp. at 713 (citing Flora v. United States, 357 U.S. 63, 78 S.Ct. 1079, 2 L.Ed.2d 1165 (1958), aff'd on reh'g, 362 West Page 139 U.S. 145, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960)). This Court found that the government had "provided enough support for its position to show that it might prevail."*fn5 Id. at 712. Thus, we concluded that we lacked subject matter jurisdiction over the case. Id. at 713.

Plaintiffs next attempted to restrain the Government's collection efforts in October, 1990, when they presented a proposed Order to Show Cause requesting that an Internal Revenue Service collection summons be quashed and/or its' enforcement stayed. We declined to sign the proposed Order and denied plaintiffs' petition on the merits on November 1, 1990. Order, November 1, 1990, Doc. # 15. One week later, on November 9, 1990, plaintiffs filed the amended complaint which is before us now.


I. The Amended Complaint

Plaintiffs' first four claims request declarations that the assessments for their 1982, 1986, 1987 and 1988 tax liabilities are "nul [sic] and void." Amended Complaint ¶¶ 21, 32, 41, 46. In their fifth claim, plaintiffs seek injunctive relief directing defendants to release the tax liens filed on November 21, 1989. Amended Complaint ¶ 69. As defendant correctly notes, this claim is identical to the relief sought in plaintiffs' original complaint.*fn6

Defendant further points out that plaintiffs fail to state the purported basis for this Court's jurisdiction, as required by Rule 8(a)(1) of the Federal Rules of Civil Procedure.*fn7 Def.'s Mem.Supp.Mot. to Dismiss at 4. In Greenhouse, we found that the Anti-Injunction Act deprived us of subject matter jurisdiction to grant plaintiffs' relief; thus, the question of jurisdiction arises anew with plaintiffs' new complaint and a finding that indeed we have subject matter jurisdiction is a prerequisite to any decision on the merits of plaintiffs' claims.*fn8

A. The Claim for Injunctive Relief

Relying on our previous decision in this case, defendant contends that plaintiffs' fifth claim, for injunctive relief, is barred by the Anti-Injunction Act. Def.'s Mem.Supp.Mot. Dismiss and Sanct. at 3. Citing only one case in their memorandum of law, plaintiffs claim that the United States Supreme Court "eliminated the Anti-Decaratory [sic] Judgment and Anti-Injunction Sections of the Internal Revenue Code."*fn9 Pls'. Mem. at 2. For this rather novel proposition, plaintiff cites Commissioner of Internal Revenue v. Shapiro, 424 U.S. 614, 96 S.Ct. 1062, 47 L.Ed.2d 278 (1976).*fn10 This Court finds plaintiffs' reading of Shapiro indefensible. First, the Shapiro case involved a jeopardy assessment, pursuant to 26 U.S.C. § 6861, which is not at issue here. Id. at 617, 96 S.Ct. at 1066. Second, the plaintiff in Shapiro, under a final order of extradition to Israel for trial on criminal fraud charges, alleged that he could not litigate the issue with the IRS while in jail in Israel and that he would indeed be in jail in Israel unless he could use the frozen funds as bail money. Id. at 620, 96 S.Ct. at 1067. Under these dramatic circumstances, plaintiff thus satisfied at least the first prong of Enochs' two pronged test: he demonstrated the presence of extraordinary circumstances causing irreparable harm for which his remedy of later contesting the validity of the assessment was inadequate. Id. at 623, 96 S.Ct. at 1068.*fn11 Moreover, Shapiro has been interpreted to further reinforce the established rule that:

  even if [plaintiff] could establish that the
  government had no possible chance of succeeding on
  the merits, injunctive relief would still be
  prohibited unless [plaintiff] established that equity
  jurisdiction exists, i.e., that the court's failure
  to issue an injunction order enjoining the collection
  or assessment ...

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