Katzman v. Essex Waterfront Owners LLC
Before : SACK, KATZMANN, WESLEY, Circuit Judges.
Plaintiff-Appellant Denise Katzman appeals from a judgment of the United States District Court for the Southern District of New York (Batts, J.) granting Defendants-Appellants' motion to dismiss her complaint. We hold that Section 7434 of the Internal Revenue Code does not provide a cause of action for a defendant's alleged intentional failure to file an information return. For the reasons stated below, the judgment of the district court is AFFIRMED.
Plaintiff-Appellant Denise Katzman appeals from a judgment of the United States District Court for the Southern District of New York (Batts, J.) granting Defendants-Appellants' motion to dismiss her complaint. On appeal, Katzman principally contends that the dismissal of her claim brought pursuant to § 7434 of the Internal Revenue Code, a provision that creates a civil damages remedy for the willful filing of fraudulent "information return[s]," was in error. We hold that Katzman's allegations of an intentional failure to file required information returns do not state a claim under this provision, which by its terms requires an allegation that a fraudulent information return was willfully filed by the defendant. Accordingly, we affirm the district court's judgment.
We set forth below the relevant facts as alleged in the complaint.
Since January 2005, Katzman has been a resident of the Liberty Towers apartment complex in Jersey City, New Jersey. The various defendants in this action include EsseX Waterfront Urban Renewal Entity, LLC ("Renewal"), a New Jersey limited liability company that is the ground lessee of Liberty Towers, as well as other entities affiliated with Liberty Towers and Renewal.
Katzman alleges that the defendants wrongfully told her and other tenants that their rent security deposits would be held at a Jersey City bank when in fact these deposits and the interest earned thereon were assigned as collateral for a loan provided to Renewal. She also asserts that the interest earned on her and other tenants' security deposits exceeded $10 for the 2005, 2006, 2007, and 2008 tax years, and that Renewal wrongfully failed to send her and other tenants an Internal Revenue Service ("IRS") Form 1099-INT reporting this interest income for those years.
Based on these allegations, Katzman's complaint asserts nine causes of action on behalf of herself and other Liberty Towers residents. The first four claims assert that Renewal violated various provisions of the Internal Revenue Code ("IRC") -- specifically, IRC §§ 6049(a), 6722, and 7434 -- by failing to furnish correct payee statements to the tenants and file information returns with the IRS for the 2005, 2006, 2007, and 2008 tax years. The final five claims assert violations of New Jersey law relating to the defendants' alleged misuse of the tenants' security deposits and failure to provide tenants with certain notices.
The defendants moved to dismiss Katzman's complaint in its entirety, with prejudice, for failure to state a claim. By Order and Memorandum dated September 29, 2010, the court granted that motion as to Katzman's claims arising under the IRC. See Katzman v. Essex Waterfront Owners LLC, No. 09 Civ. 7541 (DAB), 2010 WL 3958819 (S.D.N.Y. Sept. 29, 2010). Insofar as Katzman asserted causes of action under IRC §§ 6049(a) and 6722, the court concluded that those provisions do not provide for a private right of action. As to the claims under § 7434, which does create a private right of action, the court concluded that the intentional non-filing of a Form 1099-INT cannot give rise to liability under the terms of that provision. Having dismissed the federal claims, the court declined to exercise supplemental jurisdiction over the pendent state claims, and accordingly dismissed those claims without prejudice. Final judgment was entered the following day. Katzman timely appealed.
The sole issue on appeal is whether Katzman has stated a claim against Renewal for violations of IRC § 7434.*fn1 We review a district court's grant of a Rule 12(b)(6) motion to dismiss de novo, "accepting all factual claims in the complaint as true, and drawing all reasonable inferences in the plaintiff's ...