Department of Labor: 03CV02414

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA MARRITA MURPHY, et al. ) ) Plaintiffs, ) ) v. ) ) INTERNAL REVENUE SERVICE, et al. ) ) Defendants. ) ____________________________________) Civil Action No. 03-02414 (RCL) MEMORANDUM OPINION This matter comes before the Court on the defendants’ motion to dismiss for lack of jurisdiction over the Internal Revenue Service (IRS) as a proper party to this suit, as well as defendants’ motion for summary judgment and plaintiff’s cross motion
  1 UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIAMARRITA MURPHY, et al.))Plaintiffs,))v.)Civil Action No. 03-02414 (RCL))INTERNAL REVENUE SERVICE, et al.))Defendants.) ____________________________________)MEMORANDUM OPINION This matter comes before the Court on the defendants’ motion to dismiss for lack of  jurisdiction over the Internal Revenue Service (IRS) as a proper party to this suit, as well asdefendants’ motion for summary judgment and plaintiff’s cross motion for partial summary judgment. F ED .   R.   C IV .   P. 12(b)(2), F ED .   R.   C IV .   P.   56(c). The defendants move to dismiss because Congress has not explicitly authorized the IRS as an agency to be sued eo nomine. Blackmar v. Guerre, 342 U.S. 512, 515 (1952). The issue before the court regarding thesummary judgment and partial summary judgment motions dispute is whether or not plaintiff’sdamages were received “on account of physical injuries or physical sickness” under the 1996amended definition of Internal Revenue Code § 104(a)(2). Further, the parties dispute whether §104(a)(2) is constitutional under the Fifth Amendment and Sixteenth Amendment. Thedefendants submitted a motion and memorandum in support of their position. Plaintiff submitteda memorandum in opposition to the defendants’ motion and supporting a cross motion.Defendants subsequently filed a motion in opposition to plaintiff’s motion for summary  Marrita Murphy is also known as Marrita Leveille in portions of this litigation. 1 2 judgment, and plaintiff accordingly provided a reply memorandum. Upon consideration of the parties’ filings, the applicable law, the Federal Rules of Civil Procedure and the facts of this case,the Court finds that the defendants’ motion to dismiss will be DENIED. Defendant’s motion for summary judgment will be GRANTED and plaintiff’s cross motion for partial summary judgment will be DENIED. I. BACKGROUND Plaintiffs Marrita Murphy and Daniel Leveille filed complaints against the New York  National Guard, alleging that their former employer discriminated against them by engaging inconduct that violated six whistle blower environmental statutes. (Leveille et al.   v. New York Air  National Guard, 1995 WL 848112, *3 (DOL Off, Adm. App.). Each of the whistle blower  1 statutes provide for “compensatory damages.” The Toxic Substances Control Act, 15 U.S.C.§2622 (1994); The Safe Drinking Water Act, 42 U.S.C. §300j-9(I) (1994); The Clean Air Act, 42U.S.C. §7622 (1994); The Solid Waste Disposal Act, 42 U.S.C. §6971 (1994); The Clean Water Act, 33 U.S.C. §1367 (1994); The Comprehensive Environmental Response, Compensation andLiability Act, 42 U.S.C. §9610 (1994).During the trial, Dr. Edwin N. Carter and Dr. Barry L. Kurzer testified that plaintiff’sinjuries were the result of NYANG’s conduct. Dr. Carter testified that Murphy sustained“somatic” and “emotional” injuries, including a condition known as “bruxism,” or teeth grinding.(Aff. Dr. Carter.) Murphy had no previous history of bruxism, but was initially treated for thecondition in March 1994, when Dr. Kurzer immediately recommended a bite guard. (Aff. of Dr.Kurzer, ¶5-6.) Murphy continues to experience pain and tooth damage from the bruxism. (Id. at  3 ¶ 13-15.) Additionally, the Administrative Law Judge noted and the Administrative ReviewBoard confirmed that Murphy suffered from other “physical manifestations of stress” including“anxiety attacks, shortness of breath, and dizziness.” (Leveille v. New York Air National Guard,Recommended Decision and Order at 6 (ALJ Feb. 9, 1998.)The Secretary of Labor ruled in favor of Murphy on December 11, 1995, and dismissedDaniel Leveille’s complaint due to untimely filing. (Id.) Shortly thereafter, in 1996, Congressamended 26 U.S.C. § 104(a)(2), the statute governing plaintiff’s potential exclusion fromtaxation, limiting the exclusion to compensatory damages received on account of “physicalinjuries and physical sickness.” Prior to 1996, § 104(a)(2) required only personal injury or sickness to qualify for the tax exemption. On October 25, 1999, Murphy was awarded $70,000in damages – $45,000 for mental pain and anguish, and $25,000 for damage to her professionalreputation. (1999 WL 966951, *5 (DOL Adm. Rev.Bd.)) The Department of Labor Decisionand Order on Damages stated that “[b]y authorizing the award of compensatory damages, theenvironmental statutes have created a ‘species of tort liability’ in favor of persons who are theobjects of unlawful discrimination.” (Decision and Order on Damages, p. 4 (Oct. 25, 1999).)Murphy then filed her 2000 tax return on April 11, 2001, reporting the $70,000 shereceived in compensatory damages. (Compl. ¶ 6,7.) Plaintiff later sought a refund of thecompensatory damages plus interest on April 15, 2001, December 25, 2001, and October 8,2002, asserting that such damages were exempted from taxation under 26 U.S.C. § 104(a)(2).(Compl. ¶ 8, 9, 10, 20.) The IRS denied plaintiff’s claim for a refund, stating that plaintiff didnot demonstrate that the compensatory damages were attributable to physical injury or physicalsickness. (Id. at ¶ 14.) Plaintiff requested an appeal of this decision on January 16, 2003, and  4when the Appeals Office did not respond within 180 days, plaintiff filed this action on November 21, 2003. (Compl. at 1, 15-17.) II. ANALYSISA. Motion to Dismiss 1. The IRS is a proper party to this suit under the Administrative Procedure Act.5 U.S.C. § 702(a) (2000) states that “[a] person suffering a legal wrong because of agencyaction, or adversely affected or aggrieved by agency action . . . is entitled to judicial review,” solong as the relief sought is other than monetary damages. More specifically, “[t]he district courtshave srcinal jurisdiction of “[a]ny civil action against the United States for the recovery of aninternal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have beenexcessive or in any manner wrongfully collected under the internal revenue laws.” 28 U.S.C. §1346 (1997); United States v. Williams, 514 U.S. 527, 532 (1995).Jurisdiction over the United States in federal taxation cases was extended toadministrative agencies in 1973. 5 U.S.C. § 703 (1973). The revised statute states that an“action for judicial review may be brought against the United States, the agency by its officialtitle, or the appropriate officer” and that such action “is subject to judicial review incivil...proceedings for judicial enforcement.” Id. (emphasis added). 5 U.S.C. § 703 changed thestate of the law under Blackmar v. Guerre, 342 U.S. 512, 515 (1952), which held thatadministrative agencies could not sue or be sued unless Congress authorized the particularlyagency as a potential party to the suit. See Baumohl v. Columbia Jewelry Co., 127 F.Supp. 865
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