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Blakely v. Lew

United States District Court, Second Circuit

December 30, 2013

JOHN KEITH BLAKELY, et al., Plaintiffs,
JACOB E. LEW, Secretary of the U.S. Department of the Treasury, and DANIEL WERFEL, Acting Commissioner of the U.S. Internal Revenue Service, in their official capacities, Defendants.


JESSE M. FURMAN, District Judge.

In this action, John Keith Blakely, Rhonda L. Blakely, and the estates of John E. Long and Virginia E. Long (collectively, "Plaintiffs") seek a writ of mandamus against the Commissioner of the Internal Revenue Service ("IRS") and Secretary of the Treasury (collectively, "Defendants"), pursuant to 28 U.S.C. § 1361. Specifically, Plaintiffs seek a writ directing Defendants to (1) treat certain assets that Plaintiffs tendered to the IRS in a civil forfeiture action as tax payments; (2) address Plaintiffs' claims for a tax refund; and (3) divulge the contents of a formal review Plaintiffs claim the IRS conducted regarding their refund claims. (Am. Compl. ¶ 1 (Docket No. 15)). Defendants move (Docket No. 22) to dismiss the action for improper venue, pursuant to Federal Rule of Civil Procedure 12(b)(3), or, in the alternative, to transfer the action to the United States District Court for the Eastern District of Michigan, pursuant to 28 U.S.C. § 1406. (Defs.' Mem. Law. Supp. Mot. Dismiss or Transfer 1 ("Defs.' Mem") (Docket No. 23). Plaintiffs oppose the motion but request (Docket No. 30) that if the Court determines venue to be improper, the case be transferred to the United States District Court for the District of Columbia. (Pls.' Mem. Opp. Mot. Dismiss or Transfer 5 ("Pls.' Mem.") (Docket No. 25)). For the reasons stated below, Defendants' motion to dismiss the case is GRANTED.


On a motion to dismiss for improper venue under Rule 12(b)(3), a court generally accepts as true the factual allegations in the non-moving party's pleadings, and draws all reasonable inferences in favor of the party opposing the motion. See, e.g., Phillips v. Audio Active Ltd., 494 F.3d 378, 384 (2d Cir. 2007); Vann v. Fischer, No. 11 Civ. 1958 (JPO), 2012 WL 2384428, at *4 (S.D.N.Y. June 21, 2012). A court may, however, consider facts and documents outside the complaint in ruling on a Rule 12(b)(3) motion. See, e.g., Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353, 355 (2d Cir.2005); Martinez v. Bloomberg LP, 883 F.Supp.2d 511, 513 (S.D.N.Y. 2012). Accordingly, the following facts, construed in Plaintiffs' favor, are drawn from the Amended Complaint, attached materials, and judicial opinions cited in Defendants' memorandum relating to proceedings that Plaintiffs brought in other judicial districts.[1]

In 1992, the IRS opened a criminal investigation into Plaintiffs' operation of their business, County Folk Art Shows ("CFAS").[2] The investigation revealed that Plaintiffs had failed to pay income tax on the full amount of income they had derived from the business, and that they had violated laws against "structuring" by "placing income in amounts less than $10, 000 in various banks in order to avoid government reporting requirements on cash transactions." Blakely v. United States, 276 F.3d 853, 860 (6th Cir. 2002). All four Plaintiffs were indicted by a grand jury in the Eastern District of Michigan and eventually pleaded guilty to criminal tax evasion. See id. John Blakely and John Long also pleaded guilty to willfully structuring bank deposits, although the District Court later vacated those counts of conviction in light of the Supreme Court's subsequent decision in Ratzlaf v. United States, 510 U.S. 135 (1994), regarding the mens rea required for structuring. See Blakely, 276 F.3d at 860.

At or about the same time, the Government also brought a civil forfeiture action against Plaintiffs in the Eastern District of Michigan. See id. Plaintiffs eventually resolved the civil forfeiture charges by entering into a consent judgment with the Government. See id. Pursuant to the consent judgment, Plaintiffs forfeited various assets worth approximately $4 million, including certain real property and funds that they held in various bank accounts. (Am. Compl. ¶ 29; Compl. App'x 46-57).

Beginning in 1998, Plaintiffs took various steps to challenge and recover the assets forfeited pursuant to the consent judgment. In particular, Plaintiffs filed seven motions pursuant to Federal Rule of Civil Procedure 60(b) seeking to have the consent judgment invalidated, each of which was denied by the United States District Court for the Eastern District of Michigan and affirmed by the Sixth Circuit Court of Appeals. See United States v. Real Prop. 6185 Brandywine Drive, 326 Fed.App'x 383 (6th Cir. 2009) (per curiam) (" Brandywine Drive III "); United States v. Real Prop. 6185 Brandywine Drive, 66 Fed.App'x 617, 619 (6th Cir. 2003) (" Brandywine Drive I "). The District Court dismissed a separate action in which Plaintiffs challenged the consent judgment as fraudulent and unconstitutional, a ruling that the Sixth Circuit also affirmed. See Blakely v. United States, 276 F.3d at 866. Plaintiffs also attempted unsuccessfully to recover the assets through more informal means, by communicating with officers at the IRS and U.S. Department of Justice ("DOJ") regarding a purported tax refund based on the forfeiture. (Am. Compl. ¶¶ 35-38; Compl. App'x 79-81 (documentation of tax refund claim); Compl. App'x 84-87 (correspondence regarding the tax refund claim from officers at DOJ and the IRS)).

Significantly, the Sixth Circuit and the District Court criticized the conduct of Plaintiffs' counsel in his various attempts to have the consent judgment invalidated. At one point, for example, the District Court cited Plaintiffs' counsel for deceptive behavior, stating that it "could clearly be grounds for sanctions, " United States v. Certain Real Prop. Located at 6185 Brandywine Drive, No. 92 Civ. 40157 (PVG), 2007 WL 2049887, at *3 (E.D. Mich. July 17, 2007) (" Brandywine Drive II "). And the Sixth Circuit described a summary of Plaintiffs' claims as "misleading to a degree approaching fraud." Brandywine Drive I, 66 Fed.App'x at 621 n.5. Plaintiffs have now come to this Court seeking a writ of mandamus that would direct the IRS to, among other things, treat the value of the forfeited property as a tax payment.


In an action against an officer or employee of the United States, venue is proper

in any judicial district in which (A) a defendant in the action resides, (B) a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (C) the plaintiff resides if no real property is involved in the action.

28 U.S.C. § 1391(e)(1). Here, there is no claim that any defendants or plaintiffs reside in the Southern District of New York; accordingly, Plaintiffs rely solely on subsection (B). To determine whether it is satisfied, the Court must engage in a two-part inquiry. First, the Court must "identify the nature of the claims and the acts or omissions that the plaintiff alleges give rise to those claims." Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 432 (2d Cir. 2005). Second, it must "determine whether a substantial part of those acts or omissions occurred in the district where the suit was filed." Id.

Conducting that inquiry here, it is plain that venue is improper in the Southern District of New York. The consent judgment into which Plaintiffs entered, and which Plaintiffs contend should be treated as a tax payment, was entered into in the Eastern District of Michigan. (Compl. App'x 46, 52). Similarly, the Eastern District of Michigan is where the two surviving Plaintiffs maintain at least one residence (Am. Compl. ¶ 15); where Plaintiffs were indicted, see United States v. Long, 92 Cr. 50084; and where Plaintiffs entered their guilty pleas, see id., Docket Nos. 11-15. The only other district in which venue could arguably lie is the District of Columbia, which is where officers at the IRS and DOJ were located when they denied Plaintiffs' requests for a tax refund. ( See Compl. App'x 84-87).

By contrast, the connections Plaintiffs identify between their claims and the Southern District of New York are far too tenuous to support venue. Plaintiffs point out that their counsel communicated with government officials from his office in New York (Am. Compl. ¶¶ 8, 43-44), that counsel prepared Plaintiffs' initial refund demand letter from his New York office ( id. ¶ 9), and that Plaintiffs once met with counsel "in the vicinity of New York City" ( id. ¶ 15). These are not, however, the acts that Plaintiffs allege to have given rise to their claims; the action is predicated on the consent judgment that Plaintiffs entered into with the Government, as well as the Government's decision not to treat the assets forfeited as a tax payment. See also Birnbaum v. Blum, 546 F.Supp. 1363, 1367 (S.D.N.Y. 1982) (holding that the location of respondents' attorneys in New York was "no substitute for the law's clear mandate that the action may only be tried in the district where all defendants reside, or in which the claim arose'" (internal quotation marks omitted)). And while it is true, as Plaintiffs point out, that the Mandamus and Venue Act of 1962 was intended to expand the venue choices for plaintiffs who bring ...

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