Nancy Ellen Kovacs v. United States ( 2010 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-3328
N ANCY E LLEN K OVACS,
Plaintiff-Appellant,
v.
U NITED S TATES OF A MERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 08 CV 713—J.P. Stadtmueller, Judge.
A RGUED F EBRUARY 26, 2010—D ECIDED JULY 29, 2010
Before F LAUM and W OOD , Circuit Judges, and ST. E VE,
District Judge. 1
S T. E VE, District Judge. Plaintiff-Appellant Nancy E.
Kovacs (“Kovacs”) appeals from an order of the dis-
trict court affirming the bankruptcy court’s dismissal of
1
The Honorable Amy J. St. Eve, District Judge for the United
States District Court, Northern District of Illinois, sitting by
designation.
2 No. 09-3328
Kovacs’ claim for lack of jurisdiction. The judgment of the
district court is affirmed in part and reversed and re-
manded in part for further proceedings consistent with
this opinion.
I. FACTUAL BACKGROUND
Kovacs, a taxpayer, filed suit against Defendant-
Appellee United States of America seeking to recover
damages resulting from the Internal Revenue Service’s
(“IRS”) alleged violation of the discharge injunction
provided by Section 524 of the Bankruptcy Code, 11
U.S.C. §§ 101, et seq. Kovacs’ suit arises from an Offer and
Compromise (“OIC”) that she entered into with the IRS
in 1996 to resolve her tax liabilities for tax years 1990
through 1995. The OIC required Kovacs to timely pay
her taxes for the five years subsequent to the date that
the IRS accepted the OIC. Due to health problems, Kovacs
was unable to pay her 1999 taxes. As a result, the IRS
informed Kovacs in a January 29, 2001 letter that it was
terminating her OIC and reinstating her outstanding taxes.
On July 3, 2001, Kovacs filed for Chapter 7 bankruptcy.
On October 10, 2001, Kovacs received a bankruptcy dis-
charge which included her tax liabilities for tax years 1990
through 1995. Notwithstanding the discharge, the IRS
informed Kovacs in a November 5, 2001 notice that it had
applied her overpaid taxes for tax year 2000 to her taxes
from tax year 1991. On March 5, 2002, Kovacs contacted
the IRS and informed a service representative that she
had filed for bankruptcy and obtained a discharge from
tax years 1990 through 1995, including the 1991 tax year
No. 09-3328 3
to which the IRS had applied her overpayment. The
service representative informed Kovacs that she could
continue to make payments for the non-discharged tax
years because the IRS had not discharged all of Kovacs’
tax liabilities. That same day, Kovacs sent a letter to the
IRS asserting that the IRS had discharged her debts for
1991 through 1995.
After writing the letter to the IRS, Kovacs met with
counsel. Kovacs provided copies of the bankruptcy dis-
charge order to her attorneys, as well as the IRS’s post-
discharge notice. Kovacs’ attorneys then contacted the
IRS officer who wrote the OIC revocation letters sent to
Kovacs. The IRS officer informed Kovacs’ attorneys that
the IRS likely could not reinstate the revoked OIC and
that the most efficient way to resolve Kovacs’ situation
would be to file a new OIC. Kovacs’ attorneys also dis-
cussed the discharge of Kovacs’ taxes from 1990 through
1995 and concluded that the IRS had not discharged the
taxes because the 1996 settlement had caused a “reassess-
ment” of the 1990-1995 taxes. Because they believed that
this “reassessment” occurred less than 240 days before
Kovacs filed for bankruptcy, Kovacs’ attorneys con-
cluded that 11 U.S.C. §§ 507(a)(8) and 523(a)(8) resulted
in the non-dischargeability of the taxes. They then deter-
mined that the best strategy to resolve Kovacs’ issues
would be to file a new OIC with the IRS. On April 2, 2002,
Kovacs’ attorneys submitted a new OIC to the IRS on
behalf of Kovacs informing the IRS that Kovacs had
filed for bankruptcy and received a discharge in 2001.
After the IRS requested further information, Kovacs’ at-
torneys submitted Kovacs’ bankruptcy discharge papers
4 No. 09-3328
to the IRS. The IRS responded that it would not consider
the OIC while a bankruptcy was proceeding. Kovacs’
attorneys again contacted the IRS and informed it that
the bankruptcy proceeding was not open.
On July 8, 2002, the IRS sent Kovacs six notices of intent
to levy for tax years 1990 through 1995, as well as 1999.
Kovacs’ attorneys continued to pursue the new OIC on
behalf of Kovacs, but on January 30, 2003, the IRS
rejected the OIC based on its determination that Kovacs
had the ability to pay more than the offer amount. Kovacs
appealed that decision on February 6, 2003. In pursuing
that appeal, Kovacs’ attorneys communicated with IRS
Appeals Officer Teresa Mulcahy between July 11, 2003
and August 13, 2003. Kovacs’ attorneys provided
Mulcahy a history of Kovacs’ case, including the IRS’s
determination that the discharge did not cover the 1990-
1995 tax years. On August 13, 2003, Mulcahy informed
Kovacs’ attorneys by telephone that the IRS had made
a mistake and that Kovacs’ tax liabilities for 1990-1995
had been discharged in Kovacs’ 2001 bankruptcy. The
IRS confirmed this information in an August 14, 2003
letter to Kovacs.
Despite this communication from the IRS, on Septem-
ber 8, 2003, the IRS sent Kovacs a statement of adjust-
ment indicating that the IRS was transferring credit for
her 2001 tax refund to her 1990 tax year liabilities. The
notice also indicated a balance due for Kovacs’ 1990 tax
liabilities. By letter dated September 18, 2003, the IRS
rejected Kovacs’ most recent OIC for the 1990-1995 and
1999 taxes. The September 18, 2003 letter stated that
No. 09-3328 5
Kovacs’ tax liabilities for those years were legally due
and collectible and further requested Kovacs to pay her
account in full. Ultimately, the only actual collection by
the IRS regarding Kovacs’ 1990-1995 taxes was to apply
tax refunds to those years. The IRS, however, subse-
quently credited those amounts to Kovacs’ other out-
standing tax liabilities when the IRS realized its error.
After the IRS declined to respond to Kovacs’ January 19,
2005 administrative claim to recover damages for the
IRS’s violation of 11 U.S.C. § 524, Kovacs initiated the
present lawsuit by filing an adversary complaint in the
bankruptcy court. Kovacs sought damages in the
amount of $11,822.94 consisting of the attorneys’ fees and
costs she incurred in resolving her tax liabilities. The IRS
moved to dismiss Kovacs’ claim on jurisdictional grounds,
but the bankruptcy court denied the motion on the
basis that it had jurisdiction to grant relief to Kovacs
pursuant to 11 U.S.C §§ 105(a) and 106 and 26 U.S.C § 7433.
After the bankruptcy court ruled against the IRS on its
statute of limitations argument again at summary judg-
ment, the parties proceeded to trial. At trial, the IRS
admitted that it willfully violated 11 U.S.C. § 524(a), and
Kovacs admitted that her only damages were attorneys’
fees and costs. Kovacs also reduced the damages she
sought from $11,822.94 to $8,622 to reflect that she
could not recover for the portion of her attorneys’ fees
and costs that related to her non-discharged 1999 tax
liability. Kovacs also sought $106,198 for her costs in
litigating the bankruptcy adversary proceeding, bringing
her total request to $114,820.
6 No. 09-3328
After trial, the bankruptcy court issued an opinion
awarding Kovacs $25,000 in fees and costs. To reach this
figure, the bankruptcy court first reduced the amount
of damages Kovacs sought to $65,451.37 due to statutory
billing rates and a review of Kovacs’ attorneys’ time
records. In determining what portion of that fee amount
the IRS had to pay, the bankruptcy court analyzed a
series of factors under 26 U.S.C. §§ 7430 and 7433
including that Kovacs was the prevailing party and that
the IRS’s actions were negligent and a proximate cause
of Kovacs’ injury. The court also held, however, that
both parties were responsible for the case being over-
staffed, over-lawyered and over-pleaded and that Kovacs
had a substantial role in protracting the litigation. Ulti-
mately, the court reduced Kovacs’ award to $25,000.
Kovacs appealed the bankruptcy court’s ruling on
costs, and the IRS cross-appealed the bankruptcy court’s
finding that it had jurisdiction to hear Kovacs’ claim. The
district court noted that the bankruptcy court had deter-
mined that the procedural requirements of 26 U.S.C. § 7433did not govern Kovacs’ claim. The district court, however,
determined that because 11 U.S.C. § 524 allows for mone-
tary recovery from the United States and therefore im-
plicates the government’s sovereign immunity, the limita-
tions in 26 U.S.C. §§ 7430 and 7433 would deprive the
court of jurisdiction if not met. Despite the parties’
briefing on the issue, the district court did not address
the bankruptcy court’s power to grant relief pursuant to
11 U.S.C §§ 105(a) and 106. Instead, the district court
premised its ruling on 26 U.S.C. § 7433, which contains
No. 09-3328 7
a two-year statute of limitations. The district court
vacated the bankruptcy court’s judgment and remanded
with instructions to determine whether Kovacs’ suit
was timely filed. The district court also engaged in an
analysis of whether the bankruptcy court abused its
discretion in reducing Kovacs’ damage award to $25,000
in the event that the bankruptcy court held that it did
have jurisdiction to hear Kovacs’ claim. The district
court found that the bankruptcy court made comprehen-
sive and sound findings regarding damages under
26 U.S.C. § 7430.
On remand, the bankruptcy court held that, pursuant
to 26 U.S.C. § 7433(e) and 26 C.F.R. § 301.7433-1(g)(2),
Kovacs’ cause of action accrued when she had a rea-
sonable opportunity to discover all of the essential ele-
ments of her claim. The bankruptcy court determined
that Kovacs’ cause of action accrued on July 8, 2002
when she received the six notices of intent to levy from
the IRS. The bankruptcy court noted that Kovacs was
aware of her bankruptcy discharge and was represented
by counsel familiar with bankruptcy and tax law. The
bankruptcy court accordingly dismissed Kovacs’ ad-
versary proceeding for lack of jurisdiction because she
failed to file her claim within two years of the date her
cause of action had accrued. Kovacs appealed the decision
of the bankruptcy court regarding jurisdiction to the
district court, which affirmed the bankruptcy court’s
dismissal. Kovacs now appeals.
8 No. 09-3328
II. STANDARD OF REVIEW
“Because our review in a bankruptcy appeal is plenary,
we apply the same standards that the district court did
in reviewing the bankruptcy court’s decision.” Tidwell v.
Smith, 582 F.3d 767, 777 (7th Cir. 2009); Wiese v. Cmty. Bank
of Cent. Wis., 552 F.3d 584, 588 (7th Cir. 2009). “We examine
the bankruptcy court’s determinations of law de novo
and its findings of fact for clear error.” Id. (citing Wiese,
552 F.3d at 588). A finding is “clearly erroneous” when
“although there is evidence to support it, the reviewing
court on the entire evidence is left with the definite and
firm conviction that a mistake has been committed.” Id.(citing United States v. U.S. Gypsum Co., 333 U.S. 364, 395,
68 S. Ct. 525, 542, 92 L. Ed. 746 (1948)).
III. ANALYSIS
In the adversary proceeding underlying this appeal,
Kovacs sought to recover her attorneys’ fees and costs
arising out of the IRS’s willful violation of 11 U.S.C.
§ 524(a)(2), which provides that a bankruptcy discharge
operates as an injunction against any act to collect a
discharged debt as a personal liability of the debtor.
Because 26 U.S.C. § 7433 of the Internal Revenue Code
contains a two-year statute of limitations and 11 U.S.C.
§ 105(a) does not contain a limitation period, we first
address Kovacs’ contention that the bankruptcy court
had jurisdiction to issue a ruling against the IRS pur-
suant to 26 U.S.C. § 7433 or, alternatively, 11 U.S.C.
§§ 105 and 106 for its alleged violation of the discharge
injunction.
No. 09-3328 9
A. 26 U.S.C. § 7433(e) is the Exclusive Remedy for
a Willful Violation of the 11 U.S.C. § 524 Dis-
charge Injunction
To avoid application of the two-year statute of limita-
tions under 26 U.S.C. § 7433(e), Kovacs argues that the
bankruptcy court could have proceeded under 11 U.S.C.
§ 105, which provides that a bankruptcy court may
issue “any order, process, or judgment that is necessary
or appropriate to carry out the provisions of this title,”
and § 106, which waives sovereign immunity to allow
a court to exercise its § 105 powers against the IRS.
11 U.S.C. §§ 105, 106. As noted above, § 105 does not have
a statute of limitations. Despite these broad powers,
however, the plain language of 26 U.S.C. § 7433(e) is
clear and controls in this instance.
In 1998, Congress amended § 7433 of the Internal Reve-
nue Code by adding subsection (e) which states that if,
“in connection with any collection of Federal tax with
respect to a taxpayer, any officer or employee of the
Internal Revenue Service willfully violates any provision
of section . . . 524 (relating to effect of discharge) of title 11,
United States Code . . . such taxpayer may petition the
bankruptcy court to recover damages against the
United States.” 11 U.S.C. § 7433(e). Section 7433(e)(2)(A)
provides that “notwithstanding [11 U.S.C. § 105], such
petition shall be the exclusive remedy for recovering
damages resulting from such actions.” Section 7433 also
contains a two-year statute of limitations. 26 U.S.C.
§ 7433(d)(3).
10 No. 09-3328
The lower courts correctly analyzed Kovacs’ claim
under the rubric of 26 U.S.C. § 7433 because it is undis-
puted that her case concerns a willful violation of the
discharge injunction.2 Moreover, in construing the ap-
plicability of 26 U.S.C. § 7433(e)’s exclusivity provision,
we must “assume[ ] that the purpose of the statute is
communicated by the ordinary meaning of the words
Congress used; therefore, absent any clear indication of
a contrary purpose, the plain language is conclusive.”
United States v. Ye, 588 F.3d 411, 414-15 (7th Cir. 2009);
Pittway Corp. v. United States, 102 F.3d 932, 934 (7th Cir.
1996) (“All statutory interpretation begins with the lan-
guage of the statute itself, and where the statute’s
language is plain, the sole function of the courts is to
enforce it according to its terms.”) (citations and quota-
tion marks omitted). The exclusivity provision of 26 U.S.C.
§ 7433 is exceedingly clear and explicitly states that it
applies “notwithstanding” 11 U.S.C. § 105. Because it is the
“exclusive” remedy available to plaintiff taxpayers, prior
to recovering for a willful violation of 11 U.S.C. § 524, a
party must comply with the requirements of 26 U.S.C.
§ 7433 that may divest a bankruptcy court of jurisdiction.
See, e.g., In re Abate, No. 07-cv-2953, 2008 WL 1776529, 2008
U.S. Dist. LEXIS 21655 (D.N.J. Mar. 18, 2008) (holding
that “notwithstanding the broad power available to the
Bankruptcy Court to ensure compliance with its orders,”
a “jurisdictional prerequisite to [an action for willful
violation of a § 524 discharge] is exhaustion of IRS reme-
2
Kovacs pled in her complaint, and the IRS conceded at
trial, that the IRS willfully violated the discharge injunction.
No. 09-3328 11
dies, as 26 U.S.C. § 7433(d) requires”); Jacoway v. Dep’t of
Treasury (In re Graycarr, Inc.), 330 B.R. 741, 747 (Bankr. W.D.
Ark. 2005) (stating that the term “exclusive” in § 7433 “can
only mean that once the administrative remedies have
been exhausted—as required by § 7433(b), (d), and (e)—the
taxpayer may file a petition with the bankruptcy court
to determine the damages resulting from an alleged
willful violation of the automatic stay” and that despite
willful violation of § 524 “the court lacked jurisdiction
to order the IRS to pay damages as the trustee had not
exhausted her administrative remedies as required by
26 U.S.C. § 7433(b), (d), and (e)”); In re Lowthorp, 332 B.R.
656 (Bankr. M.D. Fla. 2005) (holding that debtors
must comply with the jurisdictional prerequisites of
26 U.S.C. §§ 7430 and 7433 prior to recovery due to a
willful violation of 11 U.S.C. § 524).
Despite the plain language of 26 U.S.C. § 7433, Kovacs
argues that the bankruptcy court independently had
jurisdiction to sanction the IRS pursuant to its inherent
powers under 11 U.S.C. § 105. To support her argument,
Kovacs first relies on Jove Eng’g, Inc. v. I.R.S., 92 F.3d 1539,
1553 (9th Cir. 1996), in which the Ninth Circuit held that
§ 105 “creates a statutory contempt power in bank-
ruptcy proceedings, distinct from the court’s inherent
contempt powers, for which Congress unequivocally
waives sovereign immunity.” Jove Eng’g and the other
cases relied by Kovacs, however, were decided prior to
the 1998 amendments to § 7433(e) of the Internal Rev-
enue Code or do not address the exclusivity provision of
§ 7433. See e.g. Distad v. United States (In re Distad), 392
B.R. 482, 487 (Bankr. D. Utah 2008); In re Torres, 377 B.R.
12 No. 09-3328
428 (Bankr. D.P.R. 2007). These cases are therefore not
instructive.
Due to the unequivocal exclusivity provision of 26 U.S.C.
§ 7433, the district court did not err in determining that
Kovacs must comply with the jurisdictional provisions of
§ 7433 prior to recovery for a willful violation of the
discharge injunction.
B. Application of 26 U.S.C. § 7433(d)(3)’s Two-Year
Statute of Limitations
Because 26 U.S.C. § 7433 is the exclusive remedy for the
harm suffered by Kovacs, we must determine whether
Kovacs timely filed her adversary proceeding against
the IRS. Pursuant to § 7433(d)(3), “an action to enforce
liability created under [§ 7433] . . . may be brought only
within 2 years after the date the right of action accrues.”
A cause of action under § 7433 “accrues when the tax-
payer has had a reasonable opportunity to discover
all essential elements of a possible cause of action.” 26
C.F.R. § 301.7443-1(g). In addition, a statute of limitations
“begins to run once a plaintiff has knowledge that would
lead a reasonable person to investigate the possibility
that his legal rights had been infringed.” Fayoade v. Spratte,
284 Fed. Appx. 345, 347 (7th Cir. 2008) (citing CSC
Holdings, Inc. v. Redisi, 309 F.3d 988, 992-93 (7th Cir. 2002)).
“It does not matter whether the plaintiff knows the
injury is actionable—he need only know that he has been
injured.” Id.; see also Central States v. Navco, 3 F.3d 167, 171
(7th Cir. 1993) (noting that claim accrues even though
victim does not know he is legally entitled to recover).
No. 09-3328 13
Moreover, litigants are charged with knowledge of the
law. See Dziura v. United States, 168 F.3d 581, 583 (1st Cir
1999) (“taxpayers—like the IRS—[are] chargeable with
knowledge of the law, and thus with knowledge that the
IRS had a duty to return [levied property]”). Kovacs filed
her administrative claim against the IRS on January 19,
2005. If Kovacs had a reasonable opportunity to dis-
cover the elements of her 11 U.S.C. § 524(a) claim more
than two years prior to that date, the bankruptcy court
lacked jurisdiction over her claim.
1. IRS’s July 8, 2002 Collection Effort
With respect to the six notices of intent to levy sent to
Kovacs by the IRS on July 8, 2002, the bankruptcy court’s
finding that Kovacs had a reasonable opportunity to
discover the elements of her cause of action against the
IRS as of the date when she received the notices is not
clearly erroneous. Kovacs received her bankruptcy dis-
charge on October 10, 2001, at which time she believed
that her taxes for 1990-1995 were discharged.3 On Novem-
ber 5, 2001, when the IRS notified Kovacs that it was
applying $300 from her tax refund to her outstanding
3
Kovacs raises a brief argument that the district court improp-
erly dismissed the bankruptcy court’s reliance on Kovacs’
deposition testimony, which the parties did not introduce into
the record. As the district court recognized, however, any
error in this regard was harmless because there was suf-
ficient evidence in the record revealing that Kovacs did not
believe that she owed the amounts sought by the IRS.
14 No. 09-3328
1991 tax liabilities, Kovacs believed that this application
was inaccurate. Moreover, in a March 5, 2002 letter to
the IRS, Kovacs asserted that her debts for 1991-1995 had
been discharged. After discussing the matter with her
attorneys and providing them with copies of her dis-
charge documentation and IRS correspondence, Kovacs’
counsel mistakenly concluded that her debts had not
been discharged. As a result, they communicated with
the IRS over several months in an effort to reach a compro-
mise regarding Kovacs’ outstanding tax liabilities. Then,
on July 8, 2002, the IRS sent Kovacs six notices of intent
to levy for tax years 1990 through 1995, as well as 1999.
Kovacs testified that she was surprised to receive these
notices because she thought the discharge was in effect.
The record accordingly supports the bankruptcy court’s
determination that Kovacs had ample opportunity to
discover the elements of her cause of action with respect
to these actions by the IRS at least by July 8, 2002. There
is no requirement that Kovacs must have had absolute
legal certainty regarding her cause of action prior to
moving forward on her legal rights. As of July 8, 2002, she
had a “reasonable opportunity to discover all essential
elements of a possible cause of action” and accordingly
her cause of action accrued on that date. See 26 C.F.R.
§ 301.7443-1(g).
Kovacs maintains that she did not have a reasonable
opportunity to discover the elements of her claim due to
a “secret” internal IRS policy. It is undisputed, however,
that the IRS willfully sought to collect tax assessments
from Kovacs that an order of the bankruptcy court had
No. 09-3328 15
previously discharged. Moreover, Kovacs’ contention
that an internal IRS policy governs whether an assess-
ment is in fact dischargeable is flawed. While an internal
IRS policy may govern collection efforts on the part of
the IRS, as the district court recognized, sections 523 and
524 of the Bankruptcy Code control the legal question
of whether a taxpayers’ liabilities are in fact discharged.
See 11 U.S.C. §§ 523, 524. An internal IRS policy cannot
trump the force of law of the Bankruptcy Code.
Moreover, there is no legal authority to support Kovacs’
position that the IRS—and not Kovacs or her attor-
neys—should bear the burden to ascertain the IRS’s
mistake in attempting to collect a discharged tax liability.
The law in this regard is clear. The statute of limitations
begins to run when the “taxpayer,” not the IRS, “has
had a reasonable opportunity to discover” the essential
elements of her cause of action. See 26 C.F.R. § 301.7443-
1(g). Kovacs was well aware of the discharge she re-
ceived on October 10, 2001 and made no effort to return
to the bankruptcy court to determine the enforceability
of that discharge. Additionally, Kovacs presents no legal
authority to support her contention that a mistake on
the part of her counsel relieves Kovacs of her duty to
investigate. The district court accordingly did not err in
affirming the bankruptcy court’s dismissal of the portion
of Kovacs’ action premised on the IRS’s July 8, 2002
collection efforts and we affirm its decision in that regard.4
4
In footnote six of her reply brief, Kovacs also briefly asserts
that equitable tolling is a jurisdictional defense and that it
(continued...)
16 No. 09-3328
2. IRS’s September 8, 2003 and September 18, 2003
Collection Efforts
Kovacs contends that the IRS’s communications after
July 8, 2002 compounded its error and were either discrete
additional violations of the discharge injunction or con-
tinuing unlawful acts that occurred within the two-year
limitation period. We agree that the actions taken by the
IRS subsequent to July 8, 2002, after the IRS informed
Kovacs in writing on August 14, 2003 of its mistake in
attempting to collect discharged taxes, were discrete and
independently actionable violations of the discharge
injunction.
As an initial matter, while not fatal to her claim based
on the IRS’s post-July 8, 2002 collection efforts, Kovacs’
invocation of the continuing violation theory is not
proper in this context. The continuing violation doctrine
acts as a defense to the statute of limitations, Limestone
Dev. Corp. v. Village of Lemont, Ill., 520 F.3d 797, 801 (7th Cir.
2008), by delaying its accrual or start date, Hukic v. Aurora
Loan Serv., 588 F.3d 420, 435 (7th Cir. 2009). The doctrine
applies when “a tort involves a continued repeated
4
(...continued)
should compel the finding that her cause of action did not
accrue until the IRS notified her of its mistake. Kovacs, how-
ever, has waived this argument because she did not raise this
issue before the district court, Skarbek v. Barnhart, 390 F.3d
500, 505 (7th Cir. 2004), and she raised it for the first time in
her reply brief, London v. RBS Citizens, N.A., 600 F.3d 742, 747
(7th Cir. 2010).
No. 09-3328 17
injury” and “the limitation period does not begin until the
date of the last injury or when the tortious act ceased.”
Rodrigue v. Olin Employees Credit Union, 406 F.3d 434, 442
(7th Cir. 2005). “The continuing violation doctrine allows
a complainant to obtain relief for a time-barred act . . . by
linking it with acts that fall within the statutory limitations
period.” Filipovic v. K & R Express Syst., Inc., 176 F.3d 390,
396 (7th Cir. 1999). “It is thus a doctrine not about a
continuing, but about a cumulative, violation.” Limestone,
520 F.3d at 801. The continuing violation doctrine, how-
ever, does not apply to “a series of discrete acts, each
of which is independently actionable, even if those acts
form an overall pattern of wrongdoing.” Rodrigue, 406
F.3d at 443; see also Filipovic, 176 F.3d at 396 (actions
“so discrete in time or circumstances that they do not
reinforce each other cannot reasonably be linked together
in a single chain, a single course of conduct, to defeat
the statute of limitations”).
Each of the IRS’s attempts to collect taxes from Kovacs
was a discrete act rather than a continuing violation or
part of the original violation. The plain language of the
Bankruptcy Code provides that a discharge “operates as
an injunction against the commencement or continuation
of . . . an act, to collect, recover or offset any such debt
as a personal liability of the debtor.” 11 U.S.C. § 524. This
is not a case in which “a series of wrongful acts
blossom[ed] into an injury on which suit [could] be
brought” as of the date of the later acts. See Limestone, 520
F.3d at 801. Instead, after the IRS informed Kovacs of its
error in attempting to collect her discharged taxes it
made two additional, discrete attempts to collect Kovacs’
18 No. 09-3328
discharged tax liabilities. Because the record supports
that each of these acts constituted a separate violation of
the discharge injunction, Kovacs need not rely on the
continuing violation doctrine to recover damages for
the IRS’s violation of the discharge injunction.
Indeed, contrary to the bankruptcy court’s holding that
Kovacs failed to demonstrate that the IRS correspondence
in September 2003 violated the discharge order, the
face of the two September 2003 letters to Kovacs require
a contrary conclusion. First, the September 8, 2003 letter,
applicable to the tax period ending December 31, 1990,
noted a balance due of $13,122.43 and requested Kovacs
to pay the full amount by September 18, 2003. Second, the
September 18, 2003 letter rejected Kovacs’ offer to pay
a portion of her tax liabilities for the tax periods ending
December 1990-December 1995, and December 1999.
The letter further stated that Kovacs’ tax liabilities for
those years were legally due and collectible and re-
quested Kovacs to pay her account in full. The mere
fact that an IRS officer had previously informed Kovacs
of its mistake does not cure its later attempts to collect
discharged taxes from Kovacs. Based on their plain lan-
guage, it is clear that the two September 2003 letters
were a new effort on the part of the IRS to collect on
Kovacs’ discharged debts and were therefore discrete
violations of the discharge order. See, e.g., Thibodaux v.
United States (In re Thibodaux), 201 B.R. 827, 832-33 (Bankr.
N.D. Ala. 1996) (holding that the IRS violated a 11
U.S.C. §524(a)(2) discharge injunction on six separate
occasions by seeking improper collection on each of those
six dates). While Kovacs cannot employ the September 8
No. 09-3328 19
and September 18, 2003 letters to save her otherwise
time-barred claims, with respect to these acts, Kovacs’
January 19, 2005 administrate claim was filed well
within the two-year statutory limitations period of 26
U.S.C. § 7433(d)(3). The bankruptcy court thus erred in
holding that Kovacs’ claim was time-barred in this regard.
IV. CONCLUSION
Because we do not find that Kovacs’ claim, as a whole,
was timely filed, we need not address the award of litiga-
tion costs upheld by the district court. Instead, we affirm
the portion of the district court’s order holding that
Kovacs’ cause of action with respect to IRS’s July 8,
2002 collection effort is time-barred. We reverse and
remand the portion of the case arising from the IRS’s
September 8, 2003 and September 18, 2003 violations for
determination of damages consistent with this opinion.
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