Atuegwu v. IRS USA

Background

Chinwe Atuegwu filed this action without a lawyer and was receiving treatment at Trenton Psychiatric Hospital. She sued the Internal Revenue Service and an IRS mail-collection stop identified as Stop B225. She sought judicial review of the IRS’s refusal to issue a tax refund and requested $600,000 in damages. The court had previously allowed her to proceed without paying filing fees.

The court described an earlier related proceeding in which Atuegwu had asserted similar claims against the IRS and IRS employees. That case was dismissed under Rule 41(b) of the Federal Rules of Civil Procedure for failure to prosecute, after her failure to appear for court-ordered depositions. The earlier court later denied her requests to reconsider the dismissal, and she did not appeal it.

In the current complaint, Atuegwu said the IRS refused to send her a tax refund and transcript on February 11, 2017. She alleged that this prevented her from obtaining a bank loan for her business, which then closed. She also alleged that she became homeless and was receiving treatment at a psychiatric hospital. She stated that she was bringing the action under 26 U.S.C. § 7422 to recover her refund.

Court’s analysis

The court construed the refund claims as claims under 26 U.S.C. § 7422 against the United States. It held that Rule 41(b) prevented Atuegwu from bringing again in this court claims that she had raised in the earlier related proceeding. Because the prior dismissal order did not say that the dismissal was without prejudice, the court treated it as an adjudication on the merits for purposes of Rule 41(b). Applying that rule, the court dismissed the previously raised claims, including the claims seeking review of the IRS’s denial of a refund, as precluded in this court.

The court separately construed the new damages claims as claims under the Federal Tort Claims Act, a statute that waives the federal government’s immunity for some types of injury claims. It ruled that the IRS and Stop B225 are federal-government entities and that federal immunity generally bars suits against them unless immunity has been waived. The court held that the Federal Tort Claims Act’s waiver does not cover the claims at issue because they arose from the assessment or collection of taxes, including the IRS’s failure to issue a tax refund.

The court also stated that, even if the tax exception did not apply, Atuegwu had not alleged that she first filed an administrative damages claim with a federal agency and received a final written decision, or waited the required period without such a decision. The court identified this failure to exhaust administrative remedies as an additional jurisdictional defect.

Disposition

Judge Laura Taylor Swain dismissed the action. The court dismissed the claims previously raised in the earlier related proceeding as precluded under Rule 41(b), and dismissed the remaining damages claims for lack of subject matter jurisdiction under the doctrine of sovereign immunity. The court denied leave to amend because it found that the defects could not be cured. It also certified that an appeal would not be taken in good faith and denied fee-free status for purposes of an appeal. The opinion does not separately label the overall dismissal as with or without prejudice.