The opinion of the court was delivered by: DITTER
In this case, plaintiff sought declaratory relief as well as compensatory and punitive damages because his employer withheld federal income taxes from his wages. Having concluded no cause of action was stated, I dismissed the complaint. Presently before me is defendants' motion for counsel fees and costs.
In 1981, plaintiff filed a Form W-4, Employee's Withholding Allowance Certificate, in which he claimed that he was exempt from having any tax withheld by his employer, the Budd Company. Because of the claimed exemption, Budd Company submitted the W-4 to the Internal Revenue Service for review, as required by 26 C.F.R. § 31.3402(f)(2)-1(g) (1982). After reviewing this certificate, the IRS District Director instructed Budd to disregard it and withhold on the basis of two withholding allowances. The plaintiff then filed another W-4 form for 1982 in which he claimed thirteen exemptions. Pursuant to 26 C.F.R. § 31.3402(f)(1)-1(g)(5)(vi) (1982),
Budd disregarded this certificate and continued to withhold on the basis of two exemptions. Notwithstanding the corporate defendant's unambiguous duty to proceed as it did, plaintiff brought this action alleging that the defendants deprived him of rights guaranteed by the Constitutions of the United States and Pennsylvania, statutory law, and the common law. He charged the defendants had conspired with the United States Department of the Treasury in a surreptitious and ill-advised scheme to annul, supersede, negate, nullify, invalidate, and inviolate the intent of Congress. He asserted that the defendants currently deny him lawful compensation by withholding "approximately 110 federal reserve notes per week from Plaintiff's wages" for federal income tax. In addition to Budd Company, suit was brought against its president and chief executive officer, its assistant comptroller, various department managers, and the individual who signed plaintiff's payroll checks. There was no allegation in the complaint as to any specific act by any of these individuals, or all of them, to suggest what part any or all played in Budd Company's withholding taxes from plaintiff's wages. Plaintiff sought a declaratory judgment that his legal and property rights had been violated, $16,500 in compensatory damages, and $225,000 in punitive damages.
Thereafter, plaintiff demanded that this matter be indexed as a lis pendens, citing as his authority Local Rule of Civil Procedure 32. The corporate defendant's real property in Philadelphia, consisting of 156 acres was described by metes and bounds. In an accompanying petition, plaintiff stated the lis pendens was sought to impress upon the defendants the magnitude of their transgressions and the hardship and irreparable injury that had been inflicted upon plaintiff as a consequence. Pursuant to plaintiff's demand, on September 22, 1982, the Clerk of Court entered a lis pendens in the judgment index under the names of Budd Company and James McNeal.
On November 23, 1982, after a hearing, I dismissed this action, supplementing my bench ruling with a written order issued November 24, 1982. I also directed the defendants' attorney to submit a brief and affidavit in support of her request for attorney's fees. Following an opposing brief and other filings, a hearing was held on February 28, 1983. I have concluded that given the utterly frivolous and harassing nature of this litigation, an award of attorney's fees is appropriate.
In Roadway Express, Inc. v. Piper, 447 U.S. 752, 756, 100 S. Ct. 2455, 2459, 65 L. Ed. 2d 488 (1980), the Supreme Court reaffirmed its recognition of an exception to the American rule that a litigant cannot recover its attorney's fees. The Court stated that this general rule "does not apply when the opposing party acted in . . . 'bad faith, vexatiously, wantonly, or for oppressive reasons.'" Id. at 765-66, 100 S. Ct. at 2464 quoting F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 126, 129, 94 S. Ct. 2157, 2163, 2165, 40 L. Ed. 2d 703 (1974). See also Lichtenstein v. Lichtenstein, 481 F.2d 682 (3d Cir. 1973), cert. denied, 414 U.S. 1144, 94 S. Ct. 895, 39 L. Ed. 2d 98 (1974). Despite the inherent power of a court to assess attorney's fees, I recognize that this authority should be exercised with restraint, Roadway Express, Inc. v. Piper, 447 U.S. at 764, 100 S. Ct. at 2463, and that the standards for bad faith are necessarily stringent. Lipsig v. National Student Marketing Corp., 214 U.S. App. D.C. 1, 663 F.2d 178, 180 (D.C.Cir. 1980). In defining this term, the Second Circuit has stated, "An action is brought in bad faith when the claim is entirely without color and has been asserted wantonly, for purposes of harassment or delay or for other improper reasons." Browning Debenture Holders' Committee v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir. 1977) (emphasis added). See also Nemeroff v. Abelson, 620 F.2d 339, 349 (2d Cir. 1980). Despite the rigorous standard which must be applied, there is ample proof that this action was not only entirely without color, but was also asserted wantonly, vexatiously, and for the purpose of harassment.
As I concluded in my November orders, this action was wholly without color for the following reasons:
(1) Although plaintiff's suit was based upon a withholding certificate and its claim of tax exempt status, there was no allegation in the complaint that the certificate was valid and at the hearing there was no reason advanced by the plaintiff to suggest that he was exempt from the payment of taxes or having taxes withheld. Quite the contrary appeared because plaintiff testified he earned more than $13.70 an hour and worked 40 hours a week, which means his gross earnings are about $28,000 a year.
(3) Plaintiff sought a declaratory judgment citing as a basis of jurisdiction 28 U.S.C. § 2201. This section of the Code, however, specifically states it is not applicable to suits with respect to federal taxes. This section means what it says. See, e.g., Shaffer v. Commissioner, 515 F. Supp. 748 (E.D.La.1981); Lynch v. Polaroid Corp., et al, 80-1 USTC P 9191 (D.Mass.), aff'd, 627 F.2d 1088 (1st Cir. 1980).
(4) Plaintiff sought an injunction to preclude the withholding of taxes from his wages. However, 26 U.S.C. § 7421 specifically states that no suit for the purpose of restraining the collection of taxes shall be maintained. This means exactly what it says. See, e.g., Stonecipher v. Bray, 653 F.2d 398 (9th Cir. 1981), cert. denied, 454 U.S. 1145, 102 S. Ct. 1006, 71 L. Ed. 2d 297 (1981); Stefanelli v. Silvestri, 524 F. Supp. 1317 (D.Nev.1981), aff'd, 698 F.2d 1232 (9th Cir.1982).
Aside from its meritless legal basis, the vexatious nature of this action is manifest in several ways.
First, this is the third time Press has brought suit to preclude the withholding of taxes from his wages. In Press v. Sullivan, et al, C.A. No. 81-2781, Judge Becker rejected Press' contention that Budd acted improperly in failing to honor his 1981 W-4 form which claimed he was exempt from withholding taxes. This claim was dismissed for want of subject matter jurisdiction. Similarly, in Press v. Rideoutte, C.A. No. 81-3552, Press sought to enjoin the IRS from instructing Budd to disregard his 1981 W-4 form because of his excessive number of claimed exemptions. Press attempted to join Budd as an additional defendant but was ...