Presently before the Court is a motion by the United States of America seeking to dismiss Plaintiffs' Complaint (Dkt. No. 13) and Plaintiffs' Amended Motion for preliminary injunctive relief, filed on May 30, 2008 (Dkt. No. 10). Also before the Court is Plaintiffs' "Application for Leave to Bring an Interlocutory Appeal of the Court's July 11, 2008 Order . . ." (Dkt. No. 24), which the Court is construing as Objections to the July 11, 2008 Order of Magistrate Judge David R. Homer (Dkt. No. 23), as directed by the Mandate of the United States Court of Appeals for the Second Circuit (Dkt. No. 29).
On March 12, 2008, Plaintiffs filed the instant Complaint styled as a qui tam action and sought preliminary injunctive relief. Dkt. No. 1; Amended Complaint (Dkt. No. 6). Plaintiffs' prolix Complaint asks the Court to order the Internal Revenue Service ("IRS") to cease and desist from any collection activities against them, including releasing all notices of liens and levies, suspending all audit activity and administrative, civil and criminal proceedings against them. Am. Compl. at ¶ 15. Plaintiffs contend that the IRS is obstructing justice and violating their constitutional rights of freedom of association and religion by attempting to collect federal income taxes on their salaries, wages and compensation through the issuance of notices of levies on their banks and employers. Id.
The Court sealed the Complaint for sixty days and denied the preliminary injunctive relief. Dkt. No. 3. Plaintiffs served the United States Attorney's Office for the Northern District of New York ("USAO") with a copy of the Complaint on March 17, 2008. On May 9, 2008, Plaintiffs filed a motion to amend three pages of the Complaint and again seeking preliminary injunctive relief. Dkt. No. 4. On May 16, 2008, the Court granted the motion to amend and denied the motion for preliminary injunctive relief, finding that Plaintiffs had "not established a likelihood of success on the merits of their claim." Dkt. No. 5. On May 30, 2008, Plaintiffs filed an amended Motion for preliminary injunctive relief. Dkt. No. 10.
On June 2, 2008, Lisa Bellamy filed a notice of appearance on behalf of the IRS, and on June 9, 2008, the United States filed the present Motion to Dismiss. Notice of appearance (Dkt. No. 9); Motion to dismiss (Dkt. No. 13). In response, Plaintiffs filed a "Motion for refusal of notice of appearance and to strike all pleadings of the [USAO] in the name of the United States because the United States is not a defendant in the captioned case." Dkt. No. 14 ("Motion to strike"). On July 11, 2008, Magistrate Judge Homer issued an order denying Plaintiffs' Motion to strike, concluding that the United States was not a plaintiff in this action because it had never sought to intervene and that the IRS' representation by attorneys for the United States was proper because the IRS is an agency of the United States. Dkt. No. 23. Plaintiffs then brought an application for leave to bring an interlocutory appeal of the July 11 Order, which Judge Homer denied. Motion (Dkt. No. 24); Order (Dkt. No. 25). Plaintiffs appealed the July 11 Order and the Order denying interlocutory appeal to the U.S. Court of Appeals for the Second Circuit. Dkt. No. 26. As noted above, the Court of Appeals directed that this Court construe Plaintiffs' Motion for leave to bring interlocutory appeal as Objections to the July 11 Order. Mandate (Dkt. No. 29).
The Government has raised several alternative grounds for dismissal and denial of Plaintiffs' Motion and Objections. The Government asserts that the Court has no jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1), that the Complaint fails to state a claim upon which relief may be granted, in accordance with Fed. R. Civ. P. 12(b)(6), that dismissal is proper pursuant to 31 U.S.C. § 3730(c)(2)(A), and that Judge Homer correctly concluded that the United States was not a plaintiff in this action because it had never sought to intervene and that the IRS' representation by attorneys for the United States was proper because the IRS is an agency of the United States. Each ground will be separately discussed.
A. 31 U.S.C. § 3730(c)(2)(A)
The qui tam provisions of the False Claims Act permit private parties to bring suits on behalf of the United States to enforce the Act's prohibitions against the submission of false claims to the Government. 31 U.S.C. § 3730(b)(1). If a qui tam action has been brought, the United States must be given the opportunity to intervene and take control of the action. 31 U.S.C. § 3720(b)(2) (providing the government with 60 days to review the complaint under seal to determine whether to intervene before the defendants are served). However, even where the Government decides not to intervene, it may still move to dismiss the suit. See United States Department of Defense v. CACI Int'l Inc., 953 F.Supp. 74, 77 (S.D.N.Y. 1995); see also Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 943 n. 2 (1997) (suggesting that the government need not intervene in order to move to dismiss the action); Riley v. St. Luke's Episcopal Hospital, No. 97-20948, 2001 WL 568727, at *3 (5th Cir. May 25, 2001) (stating that "the government retains the unilateral power to dismiss an action" (citing Searcy v. Philips Electronics N. Am. Corp., 117 F.3d 154, 160 (5th Cir. 1997)).
Among the other alternative grounds for dismissal, the United States has moved to dismiss this action pursuant to 31 U.S.C. § 3730(c)(2)(A), which provides that the government may dismiss a qui tam action over the objections of the plaintiffs if they have been informed of the filing of the motion and the Court has held a hearing on the motion. The Court may determine that a hearing is not necessary if the complaint fails to state a False Claims Act claim and a hearing would not benefit the Court in reaching a decision. See United States v. Fiske, 968 F. Supp. 1347, 1355-56 (E.D. Ark. 1997). "While the Second Circuit has yet to establish a standard to be applied when evaluating the Government's Motion to Dismiss a qui tam action pursuant to 31 U.S.C. § 3703(c)(2)(A), it has, however stated that 'the court, need not, in order to dismiss, determine that the government's decision is reasonable.'" United States ex rel Pentagon Technologies Int'l Ltd. v. United States, No. 00 CIV 6167 (DAB), 2001 WL 770940, at *7 (S.D.N.Y. July 10, 2001) (quoting United States ex rel. Stevens v. Vt. Agency of Natural Res., 162 F.3d 195, 201 (2d Cir. 1998), rev'd on other grounds, 529 U.S. 765 (2000)). In addition, although not required by the Act, the Court permitted Plaintiffs to formally oppose the Government's Motion to dismiss. This Court's consideration of the arguments raised in the Plaintiffs' opposition has provided them with an opportunity to be heard on the Government's Motion.
The government asserts that this case should be dismissed because the government can not sue itself since the United States and its agency, the IRS are one, and the sovereign cannot be sued under the provisions of 31 U.S.C. § 3729(a). The Court finds, as discussed in more detail below, that this theory, along with the others, warrants dismissal of the case.
B. Fed. R. Civ. P. 12(b)(1)
A federal court's subject matter jurisdiction in each case is of primary importance since "[i]t is a fundamental precept that federal courts are courts of limited jurisdiction." Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374 (1978). Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a court must grant a motion to dismiss when that court lacks subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). "'The party invoking federal jurisdiction bears the burden of establishing' that jurisdiction exists." Sharkey v. Quarantillo, 541 F.3d 75, 82-83 (2d Cir. 2008) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). In reviewing a motion to dismiss for lack of subject matter jurisdiction, the court "must accept as true all material ...