Chris Hansen Under The Gun

[weishaupt1776]

United States v. Christopher M. Hansen, 2005 TNT 162-15, No. 05cv0921-L (U.S.D.C. S.D.Ca. 7/26/2005).



Quote:

UNITED STATES OF AMERICA,
Plaintiff,
v.
CHRISTOPHER M. HANSEN,
Defendant.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ORDER DENYING DEFENDANT'S
MOTION TO DISMISS

[Docket Nos. 7, 9]

This matter comes before the Court on Defendant's motion to dismiss. The Court finds the motion suitable for disposition on the papers and without oral argument in accordance with Civil Local Rule 7.1(d)(1).

BACKGROUND

Defendant Christopher M. Hansen sells how-to guides filed with forms, instructions, and tactics to help customers evade paying federal taxes. (Compl. ¶ 7.) Hansen also sells sample form response letters for customers to use when they receive specific correspondence from the Internal Revenue Service ("IRS"). Id. ¶ 8. These letters are designed to disrupt or hinder the enforcement of the internal revenue laws. Id. ¶¶ 8, 9. Hansen also advises his customers to assert frivolous positions and engage in disruptive and abusive tactics to obstruct an audit by the IRS. Id. ¶ 10.

If his customers file income tax returns, Hansen advises and assists them to file returns showing only one cent of income and requesting a refund for payments made or taxes previously withheld. Id. ¶ 14. Hansen promotes the view that federal tax withholding applies only to elected or appointed officers of the United States government, and incites and assists his customers to file false IRS W-4 Forms (Employee's Withholding Allowance Certificate) and W-8 Forms (Certificate of Foreign Status) so employers will stop withholding taxes from the customers' paychecks. Id. ¶¶ 16, 17.

In addition to his other programs, Hansen markets a program to assist customers to give up their "U.S. citizenship" but retain or claim "American National citizenship." Id. ¶ 18. Hansen informs customers this results in their not being liable for federal income taxes and puts them outside the scope of federal jurisdiction. Id.

For a fee, Hansen meets with customers for administrative or consulting services and prepares their documents for them. Id. ¶ 19. He also provides his customers with opinion letters to support their belief they do not have to pay income taxes. Id. ¶ 20.

Hansen markets his programs through word of mouth, at seminars, and on the Internet, including on his websites www.famguardian.org and www.sedm.org. Id. ¶ 21.

On May 2, 2005, the United States filed this action seeking to enjoin Hansen from: promoting programs that advise or encourage customers to violate the tax laws and evade assessment or collection of their federal tax liabilities; making false or fraudulent statements about the securing of any tax benefit by reason of participating in any plan or arrangement; engaging in conduct subject to penalty under 26 U.S.C. §§ 6700 and 6701; engaging in conduct that interferes with the administration and enforcement of the internal revenue laws; and engaging in any activity subject to penalty under the Internal Revenue Code ("IRC").

On June 9, 2005, Hansen filed an Answer and a Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted and Other Matters. The motion was scheduled for hearing on July 25, 2005. The United States filed a response on June 21, 2005. As of the date of this order, Hansen did not file a reply nor request an extension of time in which to file a reply.1

DISCUSSION

Hansen' motion to dismiss argues this Court does not have subject matter jurisdiction over this action or personal jurisdiction over Hansen. In addition, the motion requests several forms of relief. First, the motion requests the Magistrate Judge assigned from this case be dismissed. Second, that the Complaint be dismissed for failure to state a claim. Third, the motion requests "Substitution of Alleged Defendant with Proper Party." Fourth, Hansen requests dismissal as the Plaintiff. Fifth, the motion requests "Monetary relief in connection with involuntary servitude responding to vexatious legal harassment" under Federal Rule of Civil Procedure 11(c). The motion's final request is to admit evidence and petition to respect contractual limitations upon stipulated admitted evidence.

I. Subject Matter Jurisdiction

Hansen's motion argues this Court has no subject matter jurisdiction over this action. However, in his Answer, Hansen contends this Court has jurisdiction over this matter because of diversity of citizenship, because he is a "non-citizen national of California" which is a "foreign state" while the United States is a "citizen and national of the United States." (Answer at 8.) This Court has subject matter jurisdiction, but not on the basis Hansen claims.

Under 28 U.S.C. § 1340, this Court has jurisdiction to hear civil actions "arising under any Act of Congress providing for internal revenue." 28 U.S.C. § 1340. This Court also has subject matter jurisdiction over this case because the United States Government is a plaintiff. 28 U.S.C. § 1345. In addition, §§ 7402(a) and 7408 of the internal Revenue Code of 1986 allow actions brought under those statutes to be brought in federal courts. 26 U.S.C. §§ 7402(a), 7408.

II. Personal Jurisdiction

Hansen contends this Court does not have personal jurisdiction over him because he declares his domicile to be Heaven. The Court is not persuaded by these arguments.

Hansen's Answer effectively admits he is a citizen of California. (Answer at 8, stating he is a "non-citizen national of California.") Personal jurisdiction over Hansen is proper on that basis. See Milliken v. Meyer, 311 U.S. 457, 462-63 (1940). This Court can also exercise personal jurisdiction over Hansen because he was personally served while in California. (Doc. No. 4.); see Burnham v. Superior Court, 495 U.S. 604, 610-12 (1990) (holding that a defendant served while voluntarily present in the forum state is subject to personal jurisdiction there without regard to whether the defendant was only briefly in the State or whether the cause of action was related to his activities there.").

Hansen also argues this Court does not have jurisdiction to enforce the criminal or civil laws of the United States for offenses committed outside of the District of Columbia, Puerto Rico, and the territories and insular possessions of the United States. Numerous courts have rejected this argument as meritless. E.g., In re Becraft, 885 F.2d 547, 549 n.2 (9th Cir. 1989); United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987); see also United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) (rejecting defendants' contention that they were "not citizens of the United States, but rather 'Free Citizens of the Republic of Minnesota"').

Accordingly, the Court finds it has personal jurisdiction over Hansen.

III. Request for Dismissal of Magistrate Judge

In accordance with the Civil Local Rules, this action was assigned a magistrate judge in addition to a district judge. Hansen requests the magistrate judge be dismissed from this case and be replaced with an Article III judge who meets certain criteria. He argues that under 28 U.S.C. § 636, magistrate judges preside only by consent of both parties and he does not consent. This argument is unavailing.

Consent by the parties is required for magistrate judges to conduct all pretrial and post trial proceedings, enter judgment, and rule on dispositive motions. 28 U.S.C. §§ 636(c); Civ. L. R. 72.1(g). Consent is not required, however, for a magistrate judge to perform duties set forth in 28 U.S.C. § 636(b)(1)(A); those are conferred by the statute itself. 28 U.S.C. § 636(b)(1)(A); Civ. L. R. 72.1(b). Accordingly, notwithstanding Hansen's refusal to consent, the magistrate judge assigned to this action is authorized to hear and determine any pretrial motions including discovery motions, other than dispositive motions specified in 28 U.S.C. § 636(b)(1)(A). 28 U.S.C. § 636(b); Civ. L. R. 72.1. Relevant to this civil action, the magistrate judge assigned to this case will also conduct settlement conferences and case management conferences. Civ. L. R. 72.1(h), 72.2. Hansen's request for dismissal of the magistrate judge is therefore DENIED.

IV. Motion to Dismiss for Failure to State a Claim


A. Applicable Law


A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal of a claim under this Rule is appropriate only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Navarro, 250 F.3d at 732. Dismissal is warranted under Rule 12(b)(6) when the complaint lacks a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1994); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law."). Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson, 749 F.2d at 534.

[weishaupt1776]

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However, legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When ruling on a motion to dismiss, the court may consider the facts alleged in the complaint, documents attached to the complaint, documents incorporated by reference in the complaint, and matters of which the Court takes judicial notice. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998).


B. Whether the Complaint Must be Dismissed


Hansen argues the statements made in the Complaint are without any foundation, not taken under oath or penalty of perjury, and not provided in the proper form under Civil Local Rule 7.1(f). This argument does not persuade the Court to dismiss the Complaint.

As noted above, a motion to dismiss for failure to state a claim requires the court to assume the allegations of the Complaint are true and view them in a light most favorable to the plaintiff. Thompson, 295 F.3d at 895; Cahill, 80 F.3d at 337-38. So construed, the court determines whether they state a cognizable claim. It is not the United States' burden to present evidence in the Complaint. Instead, Federal Rule of Civil Procedures simply require "a short and plain statement of the claim." Fed. R. Civ. P. 8(a). "Such a statement must simply 'give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests."' Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002) (quoting Conley, 355 U.S. at 47). Accordingly, when evaluating the sufficiency of a complaint, the court's role "is necessarily a limited one," confined to determining "not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on other grounds, Harlow v. Fitzgerald, 457 U.S. 800 (1982). Having reviewed the Complaint, the Court finds its allegations sufficient to withstand a motion to dismiss.

1. First Cause of Action

The first cause of action is under IRC §§ 7408, 6700, and 6701. Section 7408 authorizes an action to enjoin promoters of abusive tax programs from further engaging in conduct subject to penalty under section 6700 (relating to penalty for promoting abusive tax shelters or plans) or section 6701 (relating to penalties for aiding and abetting understatement of tax liability).

a. IRC §§ 6700 and 7408

To state a claim for violation of IRC § 6700 warranting an injunction under IRC § 7408, the United States must allege: (1) the defendant organized or sold, or participated in the organization or sale of an entity, plan, or arrangement; (2) the defendant made or caused to be made false or fraudulent statements concerning the tax benefits to be derived from the entity, plan or arrangement; (3) the defendant knew or had reason to know that the statements were false or fraudulent; (4) the false or fraudulent statements pertained to a material matter; and (5) an injunction is necessary to prevent recurrence of this conduct. See United States v. Estate Pres. Servs., 202 F.3d 1093, 1098 (9th Cir. 2000).

The Complaint properly alleges facts to support each of these elements. First, the Complaint details the various programs offered by Hansen that encourage and assist customers to evade paying federal income taxes. (Compl. ¶¶ 7-10, 18, 21, 30.) Second, the Complaint alleges "Hansen is aware that courts have rejected his positions relating to the federal tax laws." Id. ¶ 23. Third, the Complaint alleges Hansen's statements are material because they "result in customers' illegally failing to file appropriate federal income tax returns, failing to have the proper amount of federal income taxes withheld from wages, and failing to pay their federal liabilities." Id. ¶ 22; see United States v. Schiff, 269 F. Supp. 2d 1262 (D. Nev. 2003) ("If a particular statement has a substantial impact on the decision-making process or produces a substantial tax benefit to a taxpayer, the matter is properly regarded as 'material' within the meaning of § 6700."), aff'd, 379 F.3d 621 (9th Cir. 2004). Finally, the Complaint alleges an injunction is necessary to prevent recurrence because "Hansen has continued to market his programs and interfere with the administration and enforcement of the federal tax laws" even after the IRS notified him his program was under investigation. (Compl. ¶ 24.).

b. IRC §§ 6701 and 7408

To state a claim for violation of IRC § 6701 warranting an injunction under IRC § 7408, the United States must allege: (1) the defendant prepares, assists in, procures, or advises the preparation of any portion of a return, affidavit, claim, or other document; (2) the defendant knows (or has reason to believe) that such portion will be used in connection with any material matter arising under the internal revenue laws; (3) the defendant knows that such portion (if so used) would result in an understatement of the liability for tax of another person; and (4) an injunction is necessary prevent a recurrence of this conduct. 26 U.S.C. §§ 6701, 7408. The Complaint adequately alleges each of these elements.

First, the Complaint avers Hansen has prepared and assisted customers with tax returns and other tax forms and documents. (Compl. ¶¶ 12, 14-17, 20, 31.) The United States also alleges Hansen knows or has reason to believe that the documents he prepares and assists in preparing will be used in connection with a material matter under the Internal Revenue Code -- the assessment of federal income tax liability. Id. ¶ 31. The Complaint also alleges Hansen knows his assessment will result in an understatement of another's tax liability. Id. ¶¶ 14, 31. Finally, the Complaint alleges an injunction is necessary to prevent recurrence because Hansen has continued "to interfere with the administration and enforcement of the federal tax laws" even after the IRS notified him his program was under investigation. Id. ¶ 24.

In summary, the Complaint adequately pleads facts to support the United States' first cause of action.

2. Second Cause of Action

The second cause of action seeks injunctive relief under IRC § 7402, which authorizes district courts to issue injunctions as may be necessary or appropriate for the enforcement of internal revenue laws. 26 U.S.C. § 7402(a); United States v. Ernst & Whinney, 735 F.2d 1296, 1300 (11th Cir. 1984). The Complaint adequately alleges facts to support this cause of action. As discussed above, the Complaint alleges Hansen promotes tax fraud schemes and assists customers in preparing fraudulent tax returns. The Complaint further avers these actions have interfered substantially with the administration and enforcement of the internal revenue laws. The United States also alleges unless Hansen is enjoined, he "is likely to continue to obstruct and interfere with the enforcement of the internal revenue laws." (Compl. ¶ 37.) These allegations sufficiently state a claim for relief under IRC § 7402 to withstand a motion to dismiss.

[weishaupt1776]

V. Relief Relating to Hansen's Copyright/Software Licensing Agreement

The Complaint quotes portions of Hansen's materials to support its allegations. Hansen argues his materials are covered by the Copyright/Software License Agreement attached as exhibit 3 to his Answer. Hansen contends that one of the terms of his Copyright/Software License Agreement is that whoever initiates a lawsuit against him for any materials or activities related to the author or his website agrees to substitute himself or herself as the adjudged party. On this basis, he requests the Department of Justice attorney who signed the Complaint to be substituted in as the Defendant in this case. Hansen also argues that another of the conditions of the Copyright/Software License Agreement is that the United States agrees that a limited power of attorney be granted to Hansen. Hansen argues the limited power of attorney authorizes him to request dismissal of this case. Both arguments are unavailing.

Hansen's assertion the United States or its counsel entered into a contract by virtue of quoting portions of his materials in the Complaint is unsupported by any authority. "An essential element of any contract is the consent of the parties, or mutual assent." Donovan v. RRL Corp., 26 Cal. 4th 261, 270 (2001); Cal. Civ. Code § 1550. The Court does not find selective quotations from Hansen's materials suggest the United States or its counsel consented to be bound by the terms in the Copyright/Software License Agreement that Hansen asserts. Accordingly, Hansen's requests for Substitution of Alleged Defendant with Proper Party and Petition for Dismissal as the Plaintiff are DENIED.

VI. Request for Monetary Relief

Hansen requests the Court grant him monetary relief under Federal Rule of Civil Procedure 11, to compensate him for being subjected to involuntary servitude, and as damages for violation of his Copyright/Software License Agreement. Each of these requests for relief is denied.


A. Rule 11


Hansen requests the Court sanction Department of Justice attorney Martin Shoemaker, United States Attorney Carol Lam, and Assistant United States Attorney Robert Plaxico under Rule 11 for submitting "false, libelous, unwarranted, and baseless pleadings" in this action. He further argues monetary sanctions are proper because those attorneys are: attempting to abuse this Court for political rather than legitimate Constitutional purposes; establishing a religion by attempting to proceed without any evidence; enslaving Hansen by requiring him to respond to baseless charges.

Rule 11 sanctions apply only to pleadings, written motions and other papers filed with the court. Fed. R. Civ. P. 11(b); Christian v. Mattel, Inc., 286 F.3d 1118, 1131 (9th Cir. 2002). Rule 11 contains a mandatory "safe harbor" provision requiring the moving party to serve a motion for Rule 11 sanctions at least 21 days before filing it with the court. Fed. R. Civ. P. 11(c)(1)(A). There is no indication in the record Hansen has complied with this requirement. Nor has Hansen complied with the requirement that a request for Rule 11 sanctions be brought as a separate motion. See id. Further, as this Court found above, the Complaint properly alleges claims under IRC §§ 6700, 6701, 7402, and 7408 and therefore does not subject the United States nor its counsel to Rule 11 sanctions. Hansen's request for relief under Rule 11 is therefore DENIED.


B. Involuntary Servitude


The Thirteenth Amendment and its enforcing statute, 18 U.S.C. § 1584, prohibit involuntary servitude. Involuntary servitude is defined as "a condition of servitude in which the victim is forced to work for the defendant by the use or threat of physical restraint or physical injury, or by the use or threat of coercion through law or the legal process." United States v. Kozminski, 487 U.S. 931, 952 (1988). "It is an action by the master that causes the servant to have, or to believe he has, no way to avoid continued service or confinement, of a 'superior and overpowering force, constantly present and threatening."' Ramirez-De Leon V. Mujica-Cotto, 345 F. Supp. 2d 174, 192 (D.P.R. 2004) (quoting Hodges v. United States, 203 U.S. 1, 34 (1906)).

That Hansen has had to defend against this action is not a form of involuntary servitude proscribed by the Thirteenth Amendment. That amendment was intended "'to cover those forms of compulsory labor akin to African slavery which in practical operation would tend to produce like undesirable results."' Kozminski, 487 U.S. at 942 (quoting Butler v. Perry, 240 U.S. 328, 332 (1916)). Having to defend against a lawsuit is not compulsory labor. A defendant is not obligated to defend a lawsuit; he may forego a defense and allow a default judgment to be entered against him. Cf. Id. at 938, 950 (stating that involuntary servitude "is not a situation where the servant knows he has a choice between continued service and freedom, even if the master has led him to believe that the choice may entail consequences that are exceedingly bad."). Further, involuntary servitude requires that an individual be required to perform labor or a service for the benefit of another. That is not the case here. By defending himself in this action Hansen is representing his own interests, not performing any labor or service for the benefit of the Government. Accordingly, Hansen's request for compensation as a result of his involuntary servitude is DENIED.


C. Damages Under Hansen's Copyright/Software License Agreement


Finally, Hansen's request for relief under the Copyright/Software License Agreement is denied because the record does not support a finding it constitutes a binding, enforceable contract between Hansen and the United States or its attorneys. Hansen's request for damages in accordance with his Copyright/Software License Agreement is therefore DENIED.

VII. Request to Admit Evidence

In the event his motion to dismiss is denied, Hansen requests the Court to admit into evidence certain documents for use in all future proceedings. The documents Hansen seeks to be admitted are part of the record because they have been attached as exhibits to his Answer. Insofar as he requests the Court to have them admitted as evidence to substantiate his defenses to this action, the request is premature. With the exception of Hansen's challenges to this Court's subject matter and personal jurisdiction, this motion does not lend itself to consideration of evidence outside of the Complaint. As discussed above, a Rule 12(b)(6) motion only concerns the allegations of the Complaint. The Court has also found the other relief Hansen seeks is unavailable as a matter of law. Accordingly, Hansen's petition to admit evidence is DENIED AS PREMATURE.

CONCLUSION

Having reviewed the record and applicable law, IT IS HEREBY ORDERED Defendant's Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted and Other Matters is DENIED.

IT IS SO ORDERED.

Dated: July 25, 2005

M. James Lorenz
United States District Judge

FOOTNOTE

1 Under Civil Local Rule 7.1(e)(3), Hansen's reply should have been filed and served no later than July 18, 2005. See Civ. L. R. 7.1(e)(3) (stating that reply memoranda of points and authorities are due five court days prior to the day for which the matter is noticed).

END OF FOOTNOTE

[iamfreeru2]

All the stops are being pulled out to stop the truth from being heard. Corruption abounds in the judiciary and our government. I believe as others here believe and that is government is good. It is those individuals that are in government that are corrupt and our government is full of the corrupted. That is why DC is called the District of Criminals. Chris has an uphill battle for sure.

[weishaupt1776]

Thing is, is that injunctions are heard more in equity than in law.
Chris was pleading more in law than in equity.

[scottinalaska]

It never ceases to amaze me how judges/magistrates will deny ANYthing that doesn't help to perpetuate their paycheck(conflict of interest?). If I ask if the court agrees with a Supreme court ruling about so and so, the judge says, "Oh, that's just your opinion," and won't give a straight yes or no answer. But when it comes time to deny my/our motions, it seems to be done by fiat...and then maybe supported by other court rulings like Chris' here.

The IRS may be on the ropes, but they hold the hangman's noose on those ropes and are bent on using it. How about that jury that supposedly knows you? That may be the only salvation left in some of these circuses. But of course, the definition of jury has all but left our people in this country.
Sorry, but after reading Weis' post quoting the blackrobed Jimbo Lorenz, I don't feel as hopeful no matter how incredibly talented and knowledgeable Chris is.
One thing for sure, he has now joined Larken in my prayers. Anyone copied his website in case it gets yanked?
scottinalaska

[Ice]

I would have definitely mentioned within the motion that the gov. does not have any authority to "assign" citizenship status as that would be interference with a States Sovereignty... and would have required proof of claim that they have the right to do so.

Also, there are just as many case cites that contradict those the judge cited. That fact alone should alert the People that they better get off of their butts and DO SOMETHING to let the gov. know that the People are not going to put up with this BS any longer.

Ice

[weishaupt1776]

Originally Posted by scottinalaska

Anyone copied his website in case it gets yanked?
scottinalaska

I have a 2003 version on disk

He sells his webste on a CD

You have to be careful w/some the stuff as some concepts and approaches contradict each other

Hansen argues the statements made in the Complaint are without any foundation, not taken under oath or penalty of perjury, and not provided in the proper form under Civil Local Rule 7.1(f). This argument does not persuade the Court to dismiss the Complaint.

Did the Judge make mention any further than this? The Judge ignored his own rules.
Chris should also raise the IRS rules which requires actions to be approved, aythorized and signed by real men before they can go after people.

[scottinalaska]

Francis, you are correct. But reality of it is becoming that the judge chooses to ignore what doesn't fit his paradymical wonderworld and the jury most often falls in step. I am bewildered at what more can be done. It is like playing basketball and the other team begins to make up rules like, "Hey, you're not allowed to shoot in EITHER hoop. Now that that is settled, let's keep playing and see who wins."
You respond with, "Hey, that's not fair." He responds with his usual fiat decree, "That's frivilous! Let's play ball!"
Sorry for the negative tone, but how can one get to a remedy if the sickness isn't even recognized? It's like watching our brothers getting burned alive starting at the feet and all we seem to do is try and learn from them and Monday morning quarterback it. Still, many of us pray for them and that is the least we can do.
scottinalaska