United States District Court, S.D. Florida
P. GAYLES UNITED STATES DISTRICT JUDGE.
CAUSE comes before the Court on Defendants Challenger Air
Corporation (“Challenger”); Chopper Leasing, Inc.
(“Chopper”); and Federico Jose Intriago's
Motion to Dismiss [ECF No. 35]. The Court has carefully
considered the parties' briefs, the Complaint, and the
applicable law and is otherwise fully advised in the
to the pertinent allegations in the Complaint, Plaintiff Jayo
Vera began employment as a pilot with Defendant Challenger (a
company of which Defendant Intriago is the president and CEO)
on September 1, 2012. Compl. ¶ 15. For calendar years
2013 and 2014, Challenger issued Vera a Form 1099
representing that it had paid him $96, 000 for
“non-employee compensation” in 2013 and $88, 000
for “non-employee compensation” in 2014.
Id. ¶ 24. Vera alleges that these returns are
fraudulent because he was an employee of Challenger, but the
returns misclassify the sums paid to him as non-employee
compensation. Id. ¶ 25. Defendant Chopper
(another of Intriago's companies) issued Vera a Form 1099
for calendar year 2015, representing that it paid Vera $32,
544 as “non-employee compensation.” Id.
¶ 26. Vera alleges that this return is also fraudu- lent
because he was an employee of Challenger in 2015, as well,
but the return misclassifies the sums paid to him as
non-employee compensation and because it represents
that he was paid by Chopper-a company he did not work for.
Id. ¶ 27.
filed suit against the Defendants on September 30, 2016,
asserting federal tax fraud claims under 26 U.S.C. §
7434 against Challenger, Chopper, and Intriago (Counts I, II,
and III, respectively), as well as a state law breach of
contract claim against Challenger (Count IV), a state law
unjust enrichment claim against Challenger (Count V), and a
claim for violation of the Florida Deceptive and Unfair Trade
Practices Act, Fla. Stat. § 501.201 et seq.,
against all three Defendants (Count VI). The Defendants have
moved to dismiss all claims.
survive a motion to dismiss brought pursuant to Federal Rule
of Civil Procedure 12(b)(6), a claim “must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face, '”
meaning that it must contain “factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). While a court must accept well-pleaded factual
allegations as true, “conclusory allegations . . . are
not entitled to an assumption of truth-legal conclusions must
be supported by factual allegations.” Randall v.
Scott, 610 F.3d 701, 709-10 (11th Cir. 2010).
“[T]he pleadings are construed broadly, ”
Levine v. World Fin. Network Nat'l Bank, 437
F.3d 1118, 1120 (11th Cir. 2006), and the allegations in the
complaint are viewed in the light most favorable to the
plaintiff, Bishop v. Ross Earle & Bonan, P.A.,
817 F.3d 1268, 1270 (11th Cir. 2016). The question is not
whether the claimant “will ultimately prevail . . . but
whether his complaint [is] sufficient to cross the federal
court's threshold.” Skinner v. Switzer,
562 U.S. 521, 530 (2011).
Defendants argue that Vera has failed to state tax fraud
claims under 26 U.S.C. § 7434. The relevant provision of
the Internal Revenue Code states: “If any person
willfully files a fraudulent information return with respect
to payments purported to be made to any other person, such
other person may bring a civil action for damages against the
person so filing such return.” 26 U.S.C. §
7434(a). The parties disagree on the relevant standard that
must be met in order for Vera to state a claim under this
provision or what, if any, elements must be alleged.
absence of Eleventh Circuit authority directly on point, the
Court finds a decision by a district court in the Eastern
District of Virginia, Liverett v. Torres Advanced
Enterprise Solutions, LLC, 192 F.Supp.3d 648 (E.D. Va.
2016), particularly instructive. The plaintiffs in
Liverett, like Vera here, alleged that the defendant
was liable for tax fraud based solely on the allegation that
the defendant willfully misrepresented the plaintiffs'
employment status by issuing them Form 1099s instead of Form
W-2s. Id. at 650. After undertaking a comprehensive
analysis of both the language and legislative history of the
statutory provision, the court concluded that Section 7434(a)
provides a private cause of action “only where a
defendant willfully files information returns that
misrepresent the amount of payments made” and
rejected the plaintiff's position that a willful filing
of Form 1099s instead of Form W-2s was actionable under the
statute. Id. at 655 (emphasis added).
court acknowledged that many other courts (including several
in this District) have found allegations like the
Liverett plaintiffs' (and like Vera's) to be
sufficient to state a claim for tax fraud under Section 7434.
See Id . at 651 n.5 (citing Leon v. Tapas &
Tintos, Inc., 51 F.Supp.3d 1290, 1298 (S.D. Fla. 2014);
Seijo v. Casa Salsa, Inc., No. 12-60892, 2013 WL
6184969, at *7 (S.D. Fla. Nov. 25, 2013)). However, the court
found that those decisions “did not carefully consider
the statutory language or directly address the ambiguity on
the face of § 7434(a)” (that ambiguity being what
the phrase “with respect to . . .” was meant to
modify). Id. Instead, they recited elements of a
cause of action that did not address the ambiguity.
Id. As a court in the Middle District of Florida
explained, the interpretation of Section 7434(a) employed by
the courts which have permitted claims like Vera's to
proceed “renders superfluous the phrase ‘payments
purported to be made.'” Tran v. Tran, ___
F.Supp.3d ___, ___, 2017 WL 894370, at *1 (M.D. Fla. Mar. 7,
2017) (citing Mackey v. Lanier Collection Agency &
Serv., Inc., 486 U.S. 825, 837 (1988) (disfavoring
statutory interpretation that produces surplusage)).
Tran court, in adopting the Liverett
court's holding, also explained that the statute could
not possibly permit recovery for a mere misclassification of
an employee and consequent filing of the incorrect form.
Section 7434(e) requires that an order awarding damages under
Section 7434(a) find “the correct amount which should
have been reported in the information return.” However,
if Vera's interpretation of the statute were the proper
one, a judgment entered in favor of a plaintiff under this
provision “must find the defendant liable for tax fraud
and must acknowledge that the defendant accurately reported
the plaintiff's income.” Id. at *2;
see also Liverett, 192 F.Supp.3d at 653 (explaining
that the “obvious inference from [Section] 7434(e) is
that Congress intended for the actionable frauds to stem only
from misrepresentations [of] the amounts paid”).
does not allege that any of the Defendants misrepresented any
amount that he was paid-merely that they
misrepresented his classification as an independent
contractor rather than an employee. This Court is persuaded
by the reasoned analyses of the Liverett and
Tran courts and adopts them here in concluding that
Section 7434(a) does not authorize a private cause of action
on that basis. As a result, Vera has failed to state any
claim under this provision, and the motion to dismiss the tax
fraud claims must be granted.