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United States v. Toth

United States District Court, D. Massachusetts

May 2, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
MONICA TOTH, Defendant.

          MEMORANDUM AND ORDER DENYING MOTION TO DISMISS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

         The United States of America filed this case to collect a civil penalty assessed against Defendant Monica Toth for her alleged failure to timely report her financial interest in, and/or her signatory or authority over, a foreign bank account for the 2007 calendar year. Currently before the Court is Toth's motion to dismiss [ECF No. 49]. For the reasons explained below, Toth's motion to dismiss is denied.

         I.BACKGROUND

         At the motion to dismiss stage, the Court accepts as true all well-pleaded facts, analyzes those facts in the light most hospitable to the plaintiff's theory, and draws all reasonable inferences from those facts in favor of the plaintiff. United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). The following facts are taken from the complaint. [ECF No. 1].

         In 1999, a bank account was opened in Toth's name at UBS AG in Zurich, Switzerland (the “Account”). The Account has remained open continuously since 1999. At all times since the Account was opened, Toth had a financial interest in the Account and held the authority to control the disposition of the funds in the Account.

         This case concerns Toth's tax liability related to the Account for the year 2007. At all times during the 2007 calendar year, Toth was a United States citizen and resident. Toth prepared her own federal income tax return for the year 2007, which she signed under penalty of perjury and filed in a timely manner. Toth failed to report any income or loss from the Account, or otherwise disclose the existence of the Account, in her 2007 return. Toth also failed to file a Financial Bank Account Reports form (“FBAR”) prior to June 30, 2008, as required by 31 U.S.C. § 5314 and 31 C.F.R. § 1010.350.

         The FBAR is required when a United States citizen has a financial interest in, or signatory or other authority over, any foreign financial accounts that individually or collectively have a maximum value greater than $10, 000 during the calendar year. 31 U.S.C. § 5314; 31 C.F.R. § 1010.350. The Government alleges that the Account's balance exceeded $10, 000 and that Toth had a financial interest in, and/or signatory or other authority over, the Account at all times during the 2007 calendar year.

         Sometime after June 2008, the IRS initiated an audit as to Toth's tax liability for 2007, during which time the IRS investigated matters relating to the Account. As of June 30, 2008, the Account's balance was at least $4, 347, 407. On September 19, 2013, the Treasury Department assessed a civil penalty (the “FBAR Penalty”) against Toth in the amount of $2, 173, 703, due to Toth's willful failure to disclose the Account to the IRS. Notice of the assessment of the FBAR Penalty and a demand for payment was sent to Toth on or about September 19, 2013. Toth has neglected, refused, or failed to pay the FBAR Penalty.

         On September 16, 2015, the United States initiated this action against Toth. [ECF No. 1]. On October 13, 2016, Toth filed a motion to dismiss [ECF No. 49] and memorandum in support [ECF No. 50] arguing that the instant action should be dismissed pursuant to Federal Rules of Civil Procedure 12(b)(2), (4), (5), and (6). The Government filed oppositions on October 27, 2016 [ECF No. 51] and December 14, 2016 [ECF No. 55].

         II. LEGAL STANDARDS AND DISCUSSION

         a. Toth's motion to dismiss pursuant to Rules 12(b)(4) and (5)

         Toth first moves to dismiss this action for insufficient and defective service of process pursuant to Federal Rule of Civil Procedure 12(b)(4) and (5). [ECF No. 49]. She argues that the Government failed to comply with the time limitations of Rule 4(m). [ECF No. 50 at ¶ 20]. “The plaintiff is responsible for having the summons and complaint served” upon the defendant within “120 days after the complaint is filed” unless this time period is extended by the Court following a showing of good cause. Fed.R.Civ.P. 4(c)(1), (m).[1] The complaint was filed on September 16, 2015. [ECF No. 1]. On February 1, 2016, the Government filed its proof of service, indicating that a professional process server had effected service upon Toth pursuant to Massachusetts Rule of Civil Procedure 4(d)(1) on January 11, 2016. [ECF No. 4 at 3]. As Toth was served within “120 days after the complaint [was] filed, ” the Government complied with the requirements of Federal Rule of Civil procedure 4(m).

         Toth also argues that service was insufficient because the Government failed to have her personally served with the summons and complaint. [ECF No. 50 ¶ 19]. “Unless federal law provides otherwise, an individual . . . may be served in a judicial district of the United States by . . . following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made . . . .” Fed.R.Civ.P. 4(e)(1). Massachusetts Rule of Civil Procedure 4(d)(1) allows for service to be made “by delivering a copy of the summons and of the complaint . . . by leaving copies thereof at [the plaintiff's] last and usual place of abode.” Mass. R. Civ. P. 4(d)(1). Here, a copy of the summons and complaint were left at Toth's last and usual place of abode, 76 Hallet Hill Road, Weston, Massachusetts.[2] [ECF No. 4 at 3]. Thus, because the Government complied with Massachusetts state law in serving Toth, service was not defective.

         b. Toth's motion to dismiss pursuant ...


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