United States District Court, D. New Jersey
government's complaint asserts a claim under Section
6324(b) of the Internal Revenue Code for gift taxes owed by
defendants as donees. Now before the court are the motions of
defendants Sheila Strauss and Mitchell Nenner to dismiss the
complaint for failure to state a claim, pursuant to Federal
Rule of Civil Procedure 12(b)(6), which I construe as a
motion for judgment on the pleadings, pursuant to Federal
Rule of Civil Procedure 12(c). Defendants' motions assert
that the government's claims are time-barred and that the
government has failed to comply with certain
individual-assessment procedures necessary to hold them
liable. For the reasons stated herein, defendants'
motions to dismiss are denied.
action arises as a result of gifts Sidney Elson made to
several individuals, including the two defendants who bring
these motions to dismiss. (Compl. ¶ 10} In relevant
part, defendants concede that in 2004, Mr. Elson made the
a. To Sheila Strauss: real property located
at 1875 Springfield Avenue in Maplewood, New Jersey with a
value of $345, 000 and a 15% interest in the Penn Tool
Company with a value of $164, 016 for a total of $509, 016.
b. To Mitchell Nenner: Real property located
at 820 Mountain Avenue in Springfield, New Jersey worth $455,
(Compl. ¶¶ 21, 46) (see, e.g. S.MTD at 4
("Sidney Elson made gifts to the Defendants");
M.MTD at 4 (same)) Mr. Elson did not file a gift tax return
in 2004, and had not done so at the time he died in 2006.
(Id. ¶12) The parties appear to agree that in
2009 Sheila Strauss, as Executrix, filed a gift tax return on
behalf of Mr. Elson's estate. (Id. ¶ 13;
S.MTD at 4, M.MTD at 4) The government alleges that the
return reported certain gifts and reported a gift liability
of $80, 300. (Compl. ¶ 13) After the Internal Revenue
Service ("IRS") audited the return, however, it
concluded that the return failed to report additional gifts.
The government asserts that in 2009, it assessed the Estate
of Sidney Elson additional gift taxes in the amount of $374,
131 and sent notice of that assessment to the Estate.
[Id. ¶¶ 15, 17)
Estate of Sidney Elson has made certain payments towards its
gift tax liability: "$150, 000 in 2009; $60, 000 in
2011; and $136, 000 in 2015 from the sale of the real estate
transferred to Sheila Strauss." (Id.
¶¶ 18, 22) However, as of December 4, 2017, a total
of $684, 217.79 allegedly remained owing to the IRS.
(Id. ¶ 19)
3, 2018, the government filed the complaint in this action.
On August 13, 2018, both defendants answered the complaint.
(DE 20; 22) Defendants asserted four affirmative defenses
including the statute of limitations and failure to provide
required notice. (DE 20 at 7; DE 22 at 7)
February 4, 2019, the government submitted its responses and
objections to defendants' first requests for document
production. (DE 59-1; DE 60-1) Defendants note that these
discovery responses fail to establish that the government
ever sent them individual assessments for taxes owed,
pursuant to 26U.S.C. §6901.
6, 2019, Defendants moved to dismiss the complaint for
failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6). (DE 59, 60) The government opposed those
motions, arguing inter alia that they were
procedurally defective. (DE 65). In their reply, the
defendants requested that the Court convert their motions to
dismiss into motions for summary judgment. (DE 67)
Discussion a. Procedural issues with
defendants' 12(b)(6) motions
threshold matter, I must decide first whether it was
procedurally proper for defendants to: (1) move to dismiss
after filing an answer; and (2) rely on evidence outside of
filed their rule 12(b)(6) motions after answering the
complaint. It is true, of course, that a Rule 12(b)(6) motion
to dismiss a complaint "must be filed before any
responsive pleading." Turbe v. Gov't of
V.I, 938 F.2d 427, 428 (3d Cir. 1991). Still, a motion
for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c)
may be filed at any time, and may be the functional
equivalent of a motion to dismiss. Federal Rule of Civil
Procedure 12(h)(2) "provides that a defense of failure
to state a claim upon which relief can be granted may also be
made by a motion for judgment on the pleadings."
Turbe v. Gov't of Virgin Islands, 938 F.2d 427,
428 (3d Cir. 1991). Accordingly, when a Rule 12(c) motion
asserts that the complaint fails to state a claim, the
familiar Rule 12(b)(6) standards apply. Id.
therefore fairly routine to simply recharacterize a
post-answer 12(b)(6) motion as a Rule 12(c) motion for
judgment on the pleadings. Having done so, I would proceed to
analyze it under Rule 12(b)(6) standards.
Rule 12(b)(6) standards provide that the facts alleged in the
complaint are accepted as true and all reasonable inferences
are drawn in favor of the plaintiff. New Jersey
Carpenters & the Trustees Thereof v. Tishman
Const, Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir.
2014). "[A] plaintiffs obligation to provide the
'grounds' of his 'entitlement to relief requires
more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do."
Bell Atl Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Thus, the complaint's factual allegations must be
sufficient to raise a plaintiffs right to relief above a
speculative level, so that a claim is "plausible on its
face." Twombly, 550 U.S. at 570; see also
West Run Student Hous. Assocs., LLC v. Huntington Nat.
Bank, 712 F.3d 165, 169 (3d Cir. 2013).
motion to dismiss attaches or relies on documents extrinsic
to the pleadings, the court must first consider whether such
documents may permissibly be considered. In general, the
Court in considering a Rule 12(b)(6) motion is confined to
the allegations of the complaint, with narrow exceptions:
"Although phrased in relatively strict terms, we have
declined to interpret this rule narrowly. In deciding motions
under Rule 12(b)(6), courts may consider "document[s]
integral to or explicitly relied upon in the complaint,"
In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1426 (3d Cir. 1997) (emphasis in original), or any
"undisputedly authentic document that a defendant
attaches as an exhibit to a motion to dismiss if the
plaintiffs claims are based on the document," PBGC
v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.
1993)." In re Asbestos Products Liability Litigation
(No. VI), 822 F.3d 125, 134 n.7 (3d Cir. 2016).
documents attached to the defendants' motions consist of
discovery responses. These I will not consider under Rule
12(b)(6) because they are not cited in the complaint and the
government's claims are not based on them. See
defendants, however, propose another solution. In their reply
brief, they request that the court convert their motion to
one for summary judgment.
(d) Result of Presenting Matters Outside the
Pleadings. If, on a motion under Rule 12(b)(6) or 12(c),
matters outside the pleadings are presented to and not
excluded by the court, the motion must be treated as one for
summary judgment under Rule 56. All parties must be given a
reasonable opportunity to present all the material that is
pertinent to the motion.
Fed. R. Civ. P. 12(d). When presented with extrinsic
documents not properly considered on a motion to dismiss, the
Court may of course simply disregard them; otherwise, it
"may either deny the motion or convert it into a motion
for summary judgment, providing the parties with a schedule
for submission of statements in compliance with Local Civil
Rule 56.1, supplemental briefs, and any supplemental evidence
they deem necessary." Dix v. Total Petrochemicals
USA, Inc., No. 10-3196, 2011 WL 2474215, at *2 (D.N.J.
June 20, 2011).
decision whether to convert a motion to dismiss into a
summary judgment, however, is a discretionary one. See
Telfair v. Tandy, No. 08-731, 2009 WL 2132433, at *3
(D.N.J. July 13, 2009) ("A court deciding a motion to
dismiss has the discretion to accept materials beyond the
pleadings and then convert the motion into one for summary
judgment") (citing Gunson v. James, 364
F.Supp.2d 455, 460-61 (D.N.J.2005)). I choose not to exercise
my discretion in this manner, for two reasons.
a motion for summary judgment is premature; I adhere to the
usual rule that summary judgment motions are best considered
at the close of fact discovery. This ensures an orderly
procedure and saves the court from serial motions brought by
parties to exploit some temporary advantage in the discovery
the defendants have invoked summary judgment only in their
reply brief. To give the government a fair chance to respond
would require the court to ...