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Simon v. Muschell

United States District Court, N.D. Indiana, Fort Wayne Division

September 13, 2017

JAMES A. SIMON, et al., Plaintiffs,
v.
SPECIAL AGENT PAUL MUSCHELL, et al., Defendants. JAMES A. SIMON, Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant.

          OPINION AND ORDER

          William C. Lee, Judge United States District Court

         This matter is before the court on a motion for judgment on the pleadings, filed by defendants Special Agent Paul Muschell (“SA Muschell”), Special Agent in Charge Alvin Patton (“SAC Patton”), and Special Agent Linda Porter (SA Porter”)(collectively “Special Agents”), on December 17, 2016. The plaintiffs, James A. Simon (“Simon”), individually and as parent and guardian of R.S., and the Estate of Denise J. Simon, filed their response on January 20, 2017. The Special Agents filed their reply on February 6, 2017. For the following reasons, the motion will be granted.

         The procedural history of this case is as follows. On November 6, 2007, IRS employees conducted a search, pursuant to a federal search warrant, of the residence belonging to James and Denise Simon, who were suspected of possible violations of the Internal Revenue Code.

         Complaint at ¶¶ 13, 18, 30, James A. Simon v. Special Agent Paul Muschell, No. 1:09-CV-301 (“Dkt. No. 1”) (N.D. Ind. Oct. 29, 2009), Dkt No. 1 (“Complaint”). Simon filed two civil actions challenging the IRS search. The first civil action sought damages from the Special Agents, unnamed IRS employees, and others for alleged violations of the Simons' Fourth and Fifth Amendment rights during the search. Id. at ¶¶ 10, 46-72. The second civil action alleged that the United States was responsible for the officers' alleged negligence during the IRS's tax investigation of the Simons under the Federal Tort Claims Act (“FTCA”). Complaint, James A. Simon v. United States, No. 1:10-CV-058-RL (N.D.Ind. Feb. 19, 2010), FTCA Dkt No 1 (“FTCA Complaint”).

         In April 2010, while the two civil actions were pending, Simon was indicted by a federal grand jury on twenty-three criminal counts related to the IRS investigation. Indictment at pp. 2-17, United States v. Simon, No. 3:10-CR-56(01) RM (N.D. Ind. April 15, 2010), CR Dkt No. 1 (hereinafter “Indictment”). This Court consolidated the civil actions and stayed the civil proceedings pending resolution of the ongoing criminal case. Opinion and Order at pp. 2, 14, Dkt No 40. On November 9, 2010, after a six-day jury trial, Simon was convicted by a jury of nineteen of the twenty-three felony counts, including filing false federal income tax returns, failing to file foreign bank account and financial account reports, mail fraud, and fraud involving federal financial aid. His conviction was affirmed by the Seventh Circuit on August 15, 2013. Simon has served his sentence.

         Simon had filed a Motion to Vacate on November 13, 2014, which was denied on July 5, 2016. Simon appealed the denial of his motion to vacate his criminal sentence on October 24, 2016. The Seventh Circuit denied Simon's request for certificate of appealability on June 7, 2017, stating that there was no showing of denial of constitutional rights.

         This Court lifted its stay of the consolidated civil proceedings for the limited purpose of briefing and disposition of the United States' motion to dismiss the FTCA actions. On February 24, 2015, this Court dismissed the FTCA Complaint on the ground that there was no waiver of sovereign immunity under the FTCA where Plaintiffs' claims arose out of the assessment or collection of taxes. See 28 U.S.C. § 2680(c). Opinion and Order at pg.19, Dkt No 51.

         This Court next lifted the stay of the civil proceedings for the limited purpose of allowing the individually-named Special Agents to file a motion for judgment on the pleadings raising a purely legal issue, the Judgment Bar of 28 U.S.C. § 2676. Opinion and Order, pg. 3 Dkt No. 57. After the Special Agents' motion had been briefed, but before a decision was rendered, this Court granted a stay pending a ruling in Simmons v. Himmelreich. The Supreme Court held on June 6, 2016, that the dismissal of an FTCA claim against the United States does not bar a subsequent action by the claimant against the same federal employees whose acts gave rise to the FTCA claim. Simmons v. Himmelreich, U.S., 136 S.Ct. 1843 (2016). Accordingly, the Special Agents withdrew their motion for judgment on the pleadings (Dkt 70, November 29, 2016).

         As the stay of proceedings entered on December 15, 2015 expired with the Supreme Court's final ruling in Himmelreich, the defendants, on December 17, 2016, filed a new Motion for Judgment on the Pleadings, which is presently before this Court. The defendants claim that the Plaintiffs fail to state a claim upon which relief can be granted and that the action is barred by the qualified immunity of the defendants.[1] Finally the Defendants claim that all claims against SAC Patton should be dismissed on the basis that he may not be held liable for damages based solely on the actions of individuals he supervised. Defendants request the dismissal of all of the plaintiffs' claims against defendants Muschell, Patton and Porter.

         Rule 12(c) of the Federal Rules of Civil Procedure permits a party to move for judgment on the pleadings on a ground set forth in Rule 12(b) after the complaint and answer have been filed. Northern Indiana Gun & Outdoor Shows v. South Bend, 163 F.3d 449, 452 (7th Cir. 1998). In reviewing a motion made pursuant to Rule 12(c) on the ground of failure to state a claim upon which relief can be granted, the Court applies the same standard that it applies when reviewing a motion to dismiss made pursuant to Rule 12(b)(6). Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 633 (7th Cir. 2007). Consequently, “[a] court will grant a Rule 12(c) motion only when it appears beyond a doubt that the plaintiff cannot prove any facts to support a claim for relief and the moving party demonstrates that there are no material issues of fact to be resolved.” Brunt v. Serv. Employees Int'l Union, 284 F.3d 715, 718-19 (7th Cir. 2002).

         In reviewing a 12(c) motion, the Court may consider the contents of the pleadings, including any attached exhibits. Northern Indiana Gun & Outdoor Shows, 163 F.3d at 452. The Court may also take judicial notice of matters of public record, including public court documents, without converting a motion for judgment on the pleadings into a motion for summary judgment. Harrison v. Deere & Co., 533 F. App'x 644, 647 n.3 (7th Cir. 2013); Hallie v. Wells Fargo Bank, N.A., No. 2:12-cv-235, 2013 WL 1835708, *1-2 (N.D. Ind. May 1, 2013); Winters v. Illinois State Bd. of Elections, 197 F.Supp.2d 1110, 1113 (N.D. Ill. 2001). “When deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must . . . decide whether it is plausible that plaintiffs have a valid claim for relief.” Diaz-Bernal v. Myers, 758 F.Supp.2d 106, 115-16 (D. Conn. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (“‘[The] factual allegations [in the complaint] must be enough to raise a right to relief above the speculative level[.]”)

         Although well-pled allegations are assumed true for purposes of a Rule 12(b)(6) motion, “allegations [that] are conclusory . . . [are] not entitled to be assumed true.” Iqbal, 556 U.S. at 681. “The plausibility standard . . . obligates the plaintiff to ‘provide the grounds of his entitlement to relief' through more than ‘labels and conclusions, and a formulaic recitation of the elements of a cause of action.'” Diaz-Bernal, 758 F.Supp.2d at 116 (quoting Twombly, 550 U.S. at 555); see Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”).

         The basic background facts in this case are supported by the record and are not disputed. Since at least January 2007, the Simons were under investigation by the IRS for possible violations of the Internal Revenue Code. Complaint at ¶ 13; United States v. Simon, 727 F.3d 682, 683-84 (7th Cir. 2013). On November 2, 2007, IRS SA Muschell submitted an Application and Affidavit for Search Warrant[2]. Complaint at ¶¶ 16, 18; Exhibit B to the Motion to Dismiss the FTCA Complaint, Dkt No 46-2, Application and Affidavit for Search Warrant, United States of America v. Search of Residence, No. 1:07-MJ-00048-RBC (N.D. Ind. Nov. 2, 2007), ECF No. 1 (hereinafter “Affidavit”). In the supporting Affidavit, SA Muschell stated that probable cause existed to believe that the Simon residence contained evidence of the following criminal offenses: conspiracy to commit offenses or defraud the United States by violating federal tax laws; willful tax evasion; willful failure to file a federal income tax return; and fraud and false statements. Affidavit, at pp. 17-29. As Plaintiffs admit in the Complaint, SA Muschell “listed in the Affidavit, a number of what he refers to as tax offender characteristics, such as sham transactions; assigned income; shell corporations; concealing income; artificial business losses; and artificial investments . . . .” Complaint, at ¶ 20.15. In fact, SA Muschell stated that it was his belief that “James A. and Denise J. Simon have devised a scheme . . . for the purpose of evading and defeating federal income taxes legally owed by James A. and Denise J. Simon.” Affidavit, at p. 17.

         On November 2, 2007, United States District Judge Theresa L. Springmann found that SA Muschell's affidavit established probable cause, and issued a warrant authorizing the IRS to search the Simon residence. Complaint at ¶ 18; Search Warrant, United States of America v.Search of Residence, No. 1:07-MJ-00048-RBC (N.D. Ind. Nov. 7, 2007), ECF No. 5. On November 6, 2007, IRS personnel, including SAs Muschell and Porter, executed a search of the Simon residence. Complaint at ¶ 30; see also Opinion and Order at pp. 1-3, CR Dkt No 74. SAC Patton was not present during the search ...


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