The opinion of the court was delivered by: William M. Skretny United States District Judge
On January 16, 2007, Plaintiff, the United States of America, (hereinafter "the government") filed the Complaint seeking to foreclose the tax liens filed against St. Augustine Center, Inc. ("the Center") and to enjoin the New York State Supreme Court, Erie County ("the State Court"), from further adjudicating a receivership action concerning the Center. Presently before the Court are Motions by defendant Adam W. Perry ("Perry"), as Receiver of the Center, seeking permission to Pay Receivership Funds into Federal Court and Limit the January 25, 2007 Tax Levy (Docket No. 18) and to Dismiss the Complaint (Docket No. 30), as well as the State Court's Motion to Dismiss the Complaint (Docket No. 25). For the reasons that follow, defendant Perry's Motion seeking permission to Pay Receivership Funds into Federal Court and to Limit the January 25, 2007 Tax Levy is granted in part and denied in part. Perry's Motion to Dismiss the Complaint is denied, and the State Court's Motion to Dismiss the Complaint is granted.
In October 2005, the New York State Commissioner of Labor obtained a judgment against the Center for wages it had failed to pay its employees in violation of New York Labor Law. After the Center failed to make a payment plan or post a bond for the unpaid wages, and failed to pay additional wages due, State Supreme Court Justice John A. Michalek placed the Center into receivership and appointed Perry as Receiver on February 14, 2006. On November 21, 2006, Perry issued a Report to the State Court recommending distribution of the Center's assets. Perry's motion for approval of the Report and distribution of the assets was scheduled to be heard by the State Court on December 20, 2006.
On December 19, 2006, the government removed the receivership action to this Court on the grounds that it was one "against" the United States.*fn1 In a decision dated December 27, 2006, the Honorable John T. Elfvin remanded the matter to State Court, concluding that removal had been improper. On December 29, 2006, the government filed a motion to intervene in the receivership action, which motion was denied by the State Court from the bench on January 10, 2007.
On January 16, 2007, the government filed the Complaint (Docket No. 1) seeking to foreclose its tax liens against the Center and seeking to enjoin the State Court from further adjudicating the receivership action because such would allegedly impair the government's ability to recover on its liens. On that same date, the government also filed a Motion for Preliminary Injunction and Motion for Expedited Hearing again seeking to enjoin the State Court from adjudicating the receivership action. (Docket Nos. 2, 3). The Court heard oral argument on the government's Motion for Preliminary Injunction on January 24, 2007. At oral argument, this Court was presented with a copy of a January 23, 2007, State Court Order adopting the findings of the Receiver's Report, discharging the Receiver, approving the fees and expenses sought by the Receiver and instructing the Receiver to await further instruction with respect to the distribution of the Center's assets.*fn2 This Court concluded that the Order mooted the government's Motion for Preliminary Injunction because the act sought to be enjoined, i.e., the State Court's further adjudication of the receivership action including the approval of Perry's Report, had been accomplished. (Docket No. 17)
On January 25, 2007, the government apparently issued a Notice of Levy against Perry, both individually and as Receiver, for all of the sums held on behalf of the Center by Perry and/or his law firm, Hodgson Russ, LLP.*fn3 On January 26, 2007, Perry filed a Motion for Permission to Pay the Receivership Funds into Federal Court and to Limit the January 25, 2007 Tax Levy. (Docket No. 18).*fn4 On February 5, 2007, the State Court filed a Motion to Dismiss the Complaint. (Docket No. 25).*fn5 On February 6, 2007, defendant Perry also filed a Motion to Dismiss the Complaint. (Docket No. 30).*fn6 On March 22, 2007, the United States filed a Combined Opposition to the Motions to Dismiss. (Docket No. 39).*fn7 On March 30, 2007, both the State Court and Perry filed declarations by their respective counsel in support of their respective Motions to Dismiss. (Docket Nos. 42, 43).
A. Motion to Deposit Funds and Limit Levy
In his Motion, Perry seeks an Order (1) permitting him to pay into the Court funds belonging to the Center over which he maintains possession as Receiver in the amount of $111,442.91; (2) permitting him to retain the amount of $67,579.53*fn8 in commissions, attorney's fees, potential attorney's fees and sums due the government, subject to the government's January 25, 2007, tax levy; (3) declaring that ownership of the funds deposited into Court remains vested in the plaintiff in the receivership action and/or the State Court itself; and (4) declaring that the January 25, 2007, Notice of Levy naming Perry and "referencing" Hodgson Russ be otherwise discharged and extinguished.*fn9 In his reply memorandum, however, Perry requests only: that the Court allow him to transfer $111,442.91 to the Clerk of the Court and hold the remainder in the Manufacturers and Traders Trust Company subject to Plaintiff's tax lien on him until the Court resolves this foreclosure action and priorities of liens thereof. Furthermore, [Perry] requests that the Court discharge the tax levy issued against Hodgson Russ, LLP . . . .
Reply Memorandum (Docket No. 35) at 4.*fn10
Perry argues that he should be able to retain possession of the amounts approved by the State Court as fees and expenses of the receivership, including attorney's fees, and an additional $10,000 in potential future fees because under 26 U.S.C. §6323(b)(8) the payment of such fees takes priority over all other claims, including the government's pre-existing tax liens.*fn11 Perry submits that it is appropriate to pay into the Court the remaining amounts until such time as this Court determines whether the government's tax liens have priority over the claims of former employees of the Center, and that the Court's acceptance of those funds will "take those funds out of the control and reach of the Receiver, will help the Court in its distribution thereof, and will relieve some burden placed on the Receiver." (Docket No. 36 at 3-4). Finally, Perry contends that, as the Receivership funds "have never been and will never be in the possession of Hodgson Russ," (Docket No. 36 at 4), discharge of the Notice of Levy as to Hodgson Russ is appropriate.
The government opposes Perry's Motion in all respects. First, the government contends that because the State Court has approved Perry's Report in the receivership action, Perry requires permission of the State Court before depositing any sum of money into this Court, other than the amounts approved by the State Court for Perry's commissions and expenses.*fn12 The government further represents that it would not object to Perry depositing all of the funds within his control upon his receipt of permission from the State Court and further represents that should such a deposit be made, it would discharge the Notice of Levy as to Perry and Hodgson Russ. Finally, the government argues that the Anti-Injunction Act, 26 U.S.C. §7421(a), prohibits this Court from vacating and/or reducing the amount of any Notice of Levy as such would impede the government's ability to levy and collect taxes.
Rule 67(a) of the Federal Rules of Civil Procedure states: Depositing Property. If any part of the relief sought is a money judgment or the disposition of a sum of money or some other deliverable thing, a party - on notice to every other party and by leave of court - may deposit with the court all or part of the money or thing, whether or not that party claims any ...