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Riverside Consulting Inc. v. United States

September 1, 2010


The opinion of the court was delivered by: Daniel L. Hovland, District Judge United States District Court


Before the Court is the Plaintiffs' "Motion for Temporary Restraining Order" filed on August 24, 2010. See Docket No. 4. The Government filed a response in opposition to the Plaintiffs' motion on August 30, 2010. See Docket No. 9. The Plaintiffs seek a temporary restraining order enjoining and restraining the Internal Revenue Service ("IRS") from enforcing levies against the Plaintiffs.


Plaintiffs Bradford Magnus and Heather Magnus were officers of Magnus Consulting, Inc. Bradford Magnus, through Magnus Consulting, provided consulting services to oil companies in western North Dakota. Magnus Consulting and the Magnuses incurred federal tax debt by paying the Magnuses' personal expenses with business funds. On May 5, 2008, the IRS assessed taxes against Magnus Consulting, of which approximately $200,000 remains unpaid.

In April 2008, Bradford Magnus and Heather Magnus incorporated Riverside Consulting, Inc., after purchasing the assets of Magnus Consulting. Bradford Magnus provides essentially the same services through Riverside Consulting as he did through Magnus Consulting. The IRS determined Riverside Consulting to be the alter ego of Magnus Consulting, Bradford Magnus, and Heather Magnus.

On March 8, 2010, the IRS issued a levy against Riverside Consulting to collect on Magnus Consulting's outstanding debt. The IRS issued levies against Bradford Magnus and Heather Magnus on August 20, 2010. The IRS issued a notice of levy to RPM Consulting, currently Riverside Consulting's only client. Plaintiffs' counsel asserts in an affidavit that Bradford Magnus and Heather Magnus are left with no means of financial support as a result of the levies. See Docket No. 6. The Plaintiffs commenced this action on August 9, 2010, seeking damages and release of the levies. The Plaintiffs contend they are suffering irreparable harm as a result of the levies and are entitled to a temporary restraining order.


When determining whether a temporary restraining order should be granted, Rule 65(b) of the Federal Rules of Civil Procedure directs the Court to look to the specific facts shown by an affidavit to determine whether immediate and irreparable injury, loss, or damage will result to the applicant. In determining whether preliminary injunctive relief should be granted, the Court is required to consider the factors set forth in Dataphase Sys., Inc., v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981). Whether a preliminary injunction or temporary restraining order should be granted involves consideration of "(1) the threat of irreparable harm to the movant; (2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest." Id.

It is well-established that the burden of establishing the necessity of a temporary restraining order or a preliminary injunction is on the movant. Baker Elec. Coop., Inc. v. Chaske, 28 F.3d 1466, 1472 (8th Cir. 1994); Modern Computer Sys., Inc. v. Modern Banking Sys., Inc., 871 F.2d 734, 737 (8th Cir. 1989). "No single factor in itself is dispositive; in each case all of the factors must be considered to determine whether on balance they weigh towards granting the injunction." Baker Elec. Coop., Inc., 28 F.3d at 1472 (quoting Calvin Klein Cosmetics Corp. v. Lenox Labs., Inc., 815 F.2d 500, 503 (8th Cir. 1987)).

26 U.S.C. § 7426 also controls whether injunctive relief can be granted in cases involving the collection of federal taxes. The statute explains:

(a) Actions permitted.

(1) Wrongful levy. If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.

(b) Adjudication. The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances:

(1) Injunction. If a levy or sale would irreparably injure rights in property which the court determines to be superior to rights of the United States in such property, the court may grant an injunction to prohibit ...

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