Lovlie v. United States

Background

Jan H. Lovlie filed this civil action against the United States of America, ten individual government defendants identified as current or former Internal Revenue Service or Department of Justice employees, and his former private attorney, Manly A. Zimmerman. Lovlie asserted claims under the Racketeer Influenced and Corrupt Organizations Act, or RICO, concerning tax assessments and collection efforts connected to an earlier related proceeding. He also asserted a legal-malpractice claim against Zimmerman.

Lovlie alleged that Internal Revenue Service Agent Dan P. Weiberg retaliated against him after Lovlie questioned an audit involving one of his clients. Lovlie alleged that the government then investigated his tax filings, assessed taxes, and pursued a court action to collect them and take possession of his home. He also alleged that tax-extension forms were fraudulent because he had not signed them. Lovlie contended that Zimmerman provided ineffective representation during the earlier tax litigation and that Zimmerman’s inaction led to summary judgment for the government and the sale of Lovlie’s home.

Earlier tax litigation

In the earlier related proceeding, the government sought to reduce unpaid federal tax assessments to judgment and foreclose federal tax liens on property owned by Lovlie and his wife. The earlier case involved assessments for tax years 1990 through 2002. The court in that proceeding applied claim preclusion, also called res judicata, to the tax years covered by an earlier Tax Court judgment. It also rejected Lovlie’s argument that certain assessments were outside the applicable assessment period and granted the government summary judgment. The court entered judgments of $951,691.97 against Lovlie individually and $956,988.95 against the couple, and authorized the sale of their home toward partial satisfaction of the judgment.

The government later collected additional amounts through foreign assets and funds held in a Wells Fargo Bank trust. Lovlie’s current complaint challenged the assessments and collection efforts and sought to revisit issues concerning the earlier judgment.

Government defendants’ motion

The United States moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that claim preclusion barred Lovlie’s claims. The court treated the motion as also applying to the individual government defendants. The court found that the earlier judgment was issued by a court with authority to decide the matter and was final on the merits. It further found that both proceedings concerned the same tax liabilities and substantially the same facts and parties or their legal equivalents.

The court ruled that Lovlie had already had opportunities to challenge the tax liabilities in the Tax Court and the earlier District Court proceeding. It also ruled that later collection efforts were connected to the earlier determination of liability and therefore fell within the same set of underlying facts. The court additionally stated that Lovlie failed to state a claim concerning the claimed expiration of the collection period because the government’s timely action to obtain a judgment kept the judgment enforceable.

The court separately found pleading deficiencies as to the individual government defendants. Lovlie named David L. Zoss, Faris R. Fink, Michael R. Pahl, Michael J. Roessner, and John A. Dicicco in the caption without making other references to them in his allegations or claims. His allegations concerning Michael Karl were described as nonspecific and speculative. The court also ruled that the alleged conduct of Dan P. Weiberg, Timothy Nichols, Pam M. Owens, and Philip Doyle—investigating, litigating, or attempting to collect taxes—did not plausibly allege the type of racketeering activity required for a civil RICO claim. The court further stated that the claim against Weiberg was outside RICO’s four-year limitations period.

The court concluded that the claims against the individual government defendants were barred by claim preclusion, were not subject to repleading, and did not state plausible civil RICO claims. Under Rule 12(b)(6), it dismissed the individual government defendants with prejudice.

Zimmerman’s motion

Zimmerman moved for judgment on the pleadings, arguing that Lovlie’s civil RICO and legal-malpractice claims were untimely and did not plausibly state claims. The court ruled that the alleged RICO injury arising from Zimmerman’s inaction was known, or should have been known, when judgment was entered in the earlier proceeding on August 7, 2008. The four-year limitations period therefore expired in 2012. To the extent Lovlie based his claims on his eviction or the sale of his home, the court ruled that the limitations period expired in 2013.

For legal malpractice, the court applied Minnesota’s six-year limitations period. It ruled that any claim based on Zimmerman’s alleged inactivity during the earlier summary-judgment proceedings expired no later than August 2014. Any claim based on Lovlie’s eviction or the sale of his home expired in 2015. The court did not reach Zimmerman’s additional argument that the complaint failed to state claims because it had already found the claims untimely.

Disposition

The court ordered that the United States’ motion to dismiss was granted and the United States of America was dismissed with prejudice. Zimmerman’s motion for judgment on the pleadings was granted and Zimmerman was dismissed with prejudice. The ten individual government defendants—Dan P. Weiberg, Michael Karl, Timothy Nichols, David L. Zoss, Pam M. Owens, Faris R. Fink, Michael R. Pahl, Michael J. Roessner, John A. Dicicco, and Philip Doyle—were dismissed with prejudice. The entire action was dismissed with prejudice.