Said Hassen v. Government of the Virgin Islan

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 16-2209
______________
*SAID HASSEN; KAREN HASSEN,
Appellants
v.
GOVERNMENT OF THE VIRGIN ISLANDS;
VIRGIN ISLANDS BUREAU OF INTERNAL REVENUE
*Amended Per Clerk’s Order of 05/08/2017
______________
Appeal from the District Court of the Virgin Islands
(D.C. No. 3-15-cv-00038)
District Judge: Hon. Curtis V. Gómez
______________
Argued May 2, 2017
______________
Before: GREENAWAY, JR., SHWARTZ, and FUENTES,
Circuit Judges.
(Filed: June 26, 2017)
______________
OPINION
______________
Alexander Golubitsky, Esq. [ARGUED]
Marjorie Rawls Roberts, P.C.
P.O. Box 6347
St. Thomas, VI 00804
Counsel for Appellants
Claude Earl Walker, Esq.
Pamela R. Tepper, Esq.
Su-Layne U. Walker, Esq. [ARGUED]
Office of Attorney General of Virgin Islands
Department of Justice
34-38 Kronprindsens Gade
GERS Complex, 2nd Floor
St. Thomas, VI 00802
Counsel for Appellees
SHWARTZ, Circuit Judge.
Said and Karen Hassen (“the Hassens”) appeal the
District Court’s order dismissing their claim against the
Government of the United States Virgin Islands (“USVI”)
and the Bureau of Internal Revenue (“BIR”) for imposing
allegedly wrongful levies on their property in violation of 26
U.S.C. § 7433(a). To bring a claim under § 7433(a), a
taxpayer must exhaust the administrative remedies set forth in
§ 7433(d). While such exhaustion is not a jurisdictional
2
requirement, it is mandatory. Here, we need not decide
whether the Hassens fulfilled this requirement because their
complaint fails to plead a violation of § 7433(a). Thus, we
will affirm the District Court’s order dismissing their
complaint.
I
The BIR sent the Hassens a final notice of intent to
levy their property to satisfy an outstanding tax debt of
$5,778.32 for the 2004 tax year. Subsequently, on March 8,
2013, the BIR issued a levy against the Hassens’ property at
First Bank Virgin Islands (“Levy 1”).
On June 11, 20131 and December 26,
1
The letter stated, in pertinent part, that:
This letter is written on behalf of our
clients Said and Karen [Hassen] (the
“Taxpayers”) in order to request an installment
agreement for the Taxpayers and to request a
transcript of assessments and payments for all
years for which the Taxpayers owe taxes, which
we believe to be 2004 only. Previously, our
office has requested a transcript for this tax
year. The records of the Bureau of Internal
Revenue (the “BIR”) indicate that the
Taxpayers owe five thousand, eight hundred
and twelve dollars and seventy six cents
($5,812.76), inclusive of all interest and
penalties, for the 2004 tax year and have no
other liability to the BIR. Enclosed herein as
Attachment 1, please find Form 2848, Power of
3
20132, the Hassens submitted letters requesting an installment
Attorney for the Taxpayers.
While we are still awaiting the transcript
of the Taxpayers’ return to determine the actual
liability of the Taxpayers, all parties agree that
the Taxpayers owe less than $10,000 in total,
and have filed all required returns.
Accordingly, 26 U.S.C.A. § 6159(c) requires
that an installment agreement be entered into, so
long as that installment agreement completely
pays the liability within three years. Therefore,
we are proposing an installment agreement
payment of $161 per month, which will
completely pay this alleged liability within three
years. Please consider this a request for an
installment agreement, and therefore, please
cease all enforced collections actions against
these Taxpayers during the time this installment
agreement is being considered, per 26 CFR §
301.6331-4(a). Should this installment
agreement be unacceptable to the BIR for any
reason, please notify us in writing as soon as
possible. Additionally, this offer for an
installment agreement is conditioned upon the
release of the levies issued against the
Taxpayers.
Supp. App. 1-2 (emphasis omitted).
2
That letter stated, in pertinent part, that:
This letter is written on behalf of our
clients Said and Karen [Hassen] (the
4
agreement to satisfy their 2004 tax debt.3 The December
“Taxpayers”) in response to your letter dated
October 31, 2013 and our telephone
conversation regarding that letter of December
12, 2013. The purpose of this letter is two-fold.
First, the purpose of this letter is to confirm that
the Taxpayers have no income tax filing
requirement for 2005 and 2006, and even if they
did, this should not interfere with their proposed
installment agreement. Second, this letter is [a]
request for a formal response to our request for
an installment agreement dated June 11, 2013,
and attached to this letter as Attachment 1 . . . .
Additionally, we are requesting a formal
response to our installment agreement request
of June 11, 2013. During our phone
conversation on December 12, 2013, you
indicated that the BIR would move forward
with a levy. We do not believe that a levy can
lawfully occur at this time. You stated that a
taxpayer must use a Form 9465 to request an
installment agreement. We respectfully
disagree.
Supp. App 12, 14 (emphasis omitted).
3
The Court may consider the contents of these letters
because they were attached to the complaint as exhibits. See
Pension Benefit Guar. Corp. v. White Consol. Indus., Inc.,
998 F.2d 1192, 1196 (3d Cir. 1993) (holding that, when
reviewing a motion to dismiss, courts consider “allegations
contained in the complaint, exhibits attached to the complaint
and matters of public record”).
5
2013 letter reflects that the Hassens and the BIR engaged in
discussions concerning their request and outstanding tax
liability, and that the BIR directed the Hassens to submit an
IRS Form 9465 to request an installment agreement. The
Hassens failed to do so but nevertheless allege that the BIR
has never accepted or rejected their proposed installment
agreement. Thereafter, the BIR issued four additional levies
against the Hassens’ accounts.
Rather than file an administrative claim as required by
26 U.S.C. § 7433(d) and 26 C.F.R. § 301.7433-1, the Hassens
filed a complaint against the USVI and BIR for imposing
allegedly wrongful levies on their property in violation of 26
U.S.C. § 7433(a) on the theory that the additional levies
violated 26 U.S.C. § 6331(k)(2), which prohibits the issuance
of any levy while a proposed installment agreement is
pending.
The USVI and BIR moved to dismiss the Hassens’
complaint pursuant to Federal Rules of Civil Procedure
12(b)(1) and (b)(6). With respect to their motion under Rule
12(b)(1), the USVI and BIR argued that the District Court
lacked subject matter jurisdiction because the Hassens failed
to exhaust their administrative remedies. The USVI and BIR
also sought dismissal under Rule 12(b)(6), arguing that the
complaint fails to state a claim upon which relief can be
granted. The District Court determined that exhaustion was
not a jurisdictional prerequisite and that dismissal under Rule
12(b)(1) was therefore not warranted, but found that the
Hassens did not exhaust their administrative remedies, which
is a condition to obtain relief, and, as a result, dismissed their
complaint pursuant to Rule 12(b)(6). The Hassens appeal.
6
II4
A
Because we must ensure that the District Court and our
Court have jurisdiction over a case before addressing the
merits, see Steel Co. v. Citizens for a Better Env’t, 523 U.S.
83, 94-95 (1998), we first review the District Court’s
conclusion that exhaustion of administrative remedies is not a
jurisdictional prerequisite to bringing a claim under 26 U.S.C.
§ 7433. Section 7433(a) allows a taxpayer to “bring a civil
action for damages” where an “officer or employee of the
Internal Revenue Service recklessly or intentionally, or by
reason of negligence, disregards any provision of” Title 26 or
its regulations. 26 U.S.C. § 7433(a). Section 7433(d)(1)
provides that a “judgment for damages shall not be awarded .
. . unless the court determines that plaintiff has exhausted the
administrative remedies available to such plaintiff within the
Internal Revenue Service.”
More than two decades ago, in Venen v. United States,
38 F.3d 100, 103 (3d Cir. 1994), we characterized this
exhaustion requirement as jurisdictional. Since then, as one
court put it, the United States Supreme Court has cautioned
against confusing “mandatory requirements of a cause of
action” with a jurisdictional prerequisite “over that cause of
action.” Hoogerheide v. IRS, 637 F.3d 634, 636 (6th Cir.
2011) (citing Arbaugh v. Y&H Corp., 546 U.S. 500, 516
(2006)). To avoid this confusion, the Court established the
4
The District Court had jurisdiction pursuant to 48
U.S.C. § 1612. We have jurisdiction pursuant to 28 U.S.C.
§ 1291.
7
following “administrable bright line” rule to determine if a
statute establishes a jurisdictional requirement:
If the Legislature clearly states that a threshold
limitation on a statute’s scope shall count as
jurisdictional, then courts and litigants will be
duly instructed and will not be left to wrestle
with the issue . . . . But when Congress does
not rank a statutory limitation as jurisdictional,
courts should treat the restriction as
nonjurisdictional in character.
Arbaugh, 546 U.S. at 515-16 (internal footnote omitted).
Thus, under Arbaugh, we “examine statutes to
determine if they speak in jurisdictional terms or refer in any
way to the jurisdiction of the courts.” Rubel v. Comm’r, 856
F.3d 301, 304 (3d Cir. 2017) (internal quotation marks,
alterations, and citation omitted). This requires that we
consider the “text, context, and relevant historical treatment”
of the provision. Reed Elsevier, Inc. v. Muchnick, 559 U.S.
154, 166 (2010). As we recently explained, “[i]n examining
the text, we look at the plain language to determine if it
speaks in jurisdictional terms, meaning whether it speaks ‘to
the power of the court rather than to the rights or obligations
of the parties.’” Rubel, 856 F.3d at 304 (quoting Landgraf v.
USI Film Prods., 511 U.S. 244, 274 (1994)). We will
therefore examine the language and context of § 7433(d) to
determine whether its exhaustion requirement is
jurisdictional.
There are several predicates to bringing suit and
obtaining damages under § 7433. Hoogerheide, 637 F.3d at
8
636. Of course, the taxpayer must allege that an IRS
employee or officer recklessly, intentionally, or negligently
violated any provision of the Internal Revenue Code. 26
U.S.C. § 7433(a). To award damages, the Court must
“determine[] that the” taxpayer has exhausted the IRS’
administrative remedies. Id. § 7433(d)(1). To exhaust such
remedies, the taxpayer must submit an administrative claim to
the appropriate representative, which includes, among other
things, the dollar amount of the claim, a description of the
injuries the taxpayer sustained, and the taxpayer’s contact
information. 26 C.F.R. § 301.7433.1(e)(1)-(2).
None of these requirements “speak in jurisdictional
terms or refer in any way to the jurisdiction of the district
court[].” Zipes v. Transworld Airlines, 455 U.S. 385, 394
(1982). Furthermore, there is “no language suggesting that
Congress intended to strip federal courts of jurisdiction when
plaintiffs do not exhaust administrative remedies.” Gray v.
United States, 723 F.3d 795, 798 (7th Cir. 2013). Rather, §
7433(d)’s exhaustion requirement “establishes a condition—
exhaustion—that plaintiffs ordinarily must satisfy before
filing a claim” for damages. Hoogerheide, 637 F.3d at 637
(internal quotation marks and alterations omitted) (quoting
Reed Elsevier, 559 U.S. at 158); see also Gray, 723 F.3d at
798 (stating exhaustion of administrative remedies is “a
statutory requirement for recovery” under § 7433(a)). Thus, a
taxpayer’s failure to exhaust, as required by § 7433(d), bars a
suit for damages under § 7433(a). However, “[p]rohibiting a
judgment for damages is not the same as forbidding any suit
or proceeding from being maintained in any court. The latter
is jurisdictional; the former is not.” Hoogerheide, 637 F.3d at
638 (internal quotation marks omitted). Thus, like the
registration requirement to institute a copyright suit, Reed,
9
559 U.S. at 169, exhaustion under § 7433(d) is a
nonjurisdictional requirement that imposes an obligation a
plaintiff must fulfill before filing a suit for damages,
Hoogerheide, 637 F.3d at 637.
Moreover, the context in which § 7433(d) appears
demonstrates that it is not jurisdictional. As the Hoogerheide
court observed, a comparison of § 7433(d) with the language
in a neighboring provision also shows § 7433(d) is
nonjurisdictional. 637 F.3d at 638. Section 7422(a) provides
that “[n]o suit or proceeding shall be maintained in any court
for the recovery of any internal revenue tax . . . until a claim .
. . has been duly filed with the Secretary.” 26 U.S.C. §
7422(a). This language embodies a condition that must be
satisfied for a court to entertain a case. Moreover, § 7422(e)
uses the word “jurisdiction” in the same section and
conditions the district court’s continued authority on certain
events. Hoogerheide, 637 F.3d at 638; see also 26 U.S.C. §
7422(e) (“If the taxpayer files a petition with the Tax Court,
the district court or the United States Court of Federal Claims,
as the case may be, shall lose jurisdiction.”). Section 7433(d)
lacks similar language that would “tie[] a district court’s
authority over a claim to a plaintiff’s exhaustion of
administrative remedies.” Hoogerheide, 637 F.3d at 638.
Thus, applying Arbaugh’s directive and considering
that § 7433(d) does not speak in jurisdictional terms or
convey that Congress intended to permit a court to exercise
jurisdiction only if the claim was exhausted, we join our sister
circuits and hold that § 7433(d)’s exhaustion requirement is
not jurisdictional and hence need not be satisfied for the
10
district court to entertain a claim under § 7433(a).5 Gray, 723
F.3d at 798; Hoogerheide, 637 F.3d at 636-38; see also Kim
v. United States, 632 F.3d 713, 718 (D.C. Cir. 2011) (treating
§ 7433(d) as an affirmative defense, and by implication not
viewing it as a jurisdictional prerequisite).
B
Having determined that exhaustion under § 7433(d)
does not impact our jurisdiction, we next consider whether
the District Court appropriately dismissed the Hassens’
complaint. We exercise plenary review of a district court’s
order granting a motion to dismiss, Burtch v. Milberg Factors,
Inc., 662 F.3d 212, 220 (3d Cir. 2011), and because our
review is plenary, “we may affirm on any grounds supported
by the record,” Maher Terminals, LLC v. Port Auth. of N.Y.
& N.J., 805 F.3d 98, 105 n.4 (3d Cir. 2015). The District
Court dismissed the complaint based upon the Hassens’
failure to fulfill § 7433(d)’s exhaustion requirement. Even if
5
Although IOP 9.1 says that a subsequent panel
cannot overrule a prior panel’s precedential opinion, “this rule
gives way when the prior panel’s holding is in conflict with
Supreme Court precedent.” Mennen Co. v. Atl. Mut. Ins.
Co., 147 F.3d 287, 295 n.9 (3d Cir. 1998); Nationwide Ins. v.
Patterson, 953 F.2d 44, 46 (3d Cir. 1991) (observing that
“[o]rdinarily, a panel of this court is bound to follow the
holdings of published opinions of prior panels of this court
unless overruled by the court [e]n banc or the holding is
undermined by a subsequent Supreme Court case”). Arbaugh
is such a precedent and thus, we are no longer bound by
Venen’s holding that the exhaustion requirement is
jurisdictional.
11
the Hassens satisfied the exhaustion requirement, their
complaint does not state a claim and was properly dismissed
under Rule 12(b)(6).
When examining whether a complaint should be
dismissed under Rule 12(b)(6), we must determine whether
the complaint “contain[s] sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In evaluating
plausibility, “we disregard rote recitals of the elements of a
cause of action, legal conclusions, and mere conclusory
statements.” James v. City of Wilkes-Barre, 700 F.3d 675,
679 (3d Cir. 2012). A claim “has facial plausibility when the
pleaded factual content allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Thompson v. Real Estate Mortg.
Network, 748 F.3d 142, 147 (3d Cir. 2014).
12
To determine the sufficiency of a complaint,
[f]irst, the court must take note of the elements
a plaintiff must plead to state a claim. Second,
the court should identify allegations that,
because they are no more than conclusions, are
not entitled to the assumption of truth. Finally,
where there are well-pleaded factual allegations,
a court should assume their veracity and then
determine whether they plausibly give rise to an
entitlement for relief.
Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir.
2010) (internal quotation marks, citations, and alterations
omitted) (drawing steps from Iqbal, 556 U.S. at 675, 679).
The Hassens’ complaint fails to state a claim upon
which relief can be granted. As stated previously, the
Hassens bring a claim against the USVI and the BIR under
§ 7433(a) of the Internal Revenue Code.6 Section 7433(a)
provides:
If, in connection with any collection of Federal
tax with respect to a taxpayer, any officer or
employee of the Internal Revenue Service [or
the BIR] recklessly or intentionally, or by
reason of negligence, disregards any provision
6
The USVI is a “mirror code” jurisdiction. This
means that the USVI adopts the tax provisions set forth in
Title 26 of the United States Code and replaces all references
to the “United States” with “Virgin Islands.” Vento v. Dir. of
V.I. Bureau of Internal Revenue, 715 F.3d 455, 465 (3d Cir.
2013).
13
of this title, or any regulation promulgated
under this title, such taxpayer may bring a civil
action for damages against the United States [or
the Virgin Islands] in a district court of the
United States.
26 U.S.C. § 7433(a). Thus, in a case against the BIR, the
elements of a § 7433(a) claim are:
(1) that an employee or officer of the BIR7;
(2) disregarded a provision of Title 26 or its
regulations8;
(3) in a reckless, intentional, or negligent manner.
Id. The Hassens attempt to establish the second element of
their § 7433 claim by alleging that the BIR disregarded §
6331(k) of the Code. This provision prohibits the BIR from
issuing a levy while a proposed “installment agreement . . . is
pending.”9 Id. § 6331(k).
7
A plaintiff asserting a § 7433 claim in a non-mirror
code jurisdiction would need to identify an employee or
officer of the IRS.
8
Gray, 723 F.3d at 802 (stating that plaintiff must
allege a statute or regulation violated in connection with the
collection of her taxes).
9
Section 6331(k) provides, in relevant part,
that: “[n]o levy may be made . . . on the property or
rights to property of any person with respect to any
unpaid tax . . . during the period that an offer by such
person for an installment agreement under section
14
The complaint is deficient in several ways. Among
other things, it contains legal conclusions that are not entitled
to the assumption of truth. James, 700 F.3d at 679 (“[W]e
disregard rote recitals of the elements of a cause of action,
legal conclusions, and mere conclusory statements.”).
Specifically, the Hassens claim that the BIR acted
“purposefully or negligently” and that “an installment
agreement was pending.” App. 15, Compl. ¶ 28.
Naked allegations of “negligent” or “purposeful”
conduct at the pleading stage, without supporting facts, are to
be disregarded. See Freedman v. City of Allentown, Pa., 853
F.2d 1111, 1115 (3d Cir. 1988) (holding that allegations that
“defendants’ actions were ‘willful’, ‘intentional and
deliberate’, and with ‘reckless disregard of [the victim’s]
rights’” are conclusory allegations (alterations in the
original)); see also Steele v. First Nat’l Bank of Mifflintown,
963 F. Supp. 2d 417, 426 (M.D. Pa. 2013) (holding that
allegations that defendant “acted willfully and recklessly
and/or negligently” are conclusory and the court “need not
accept [them] as true for purposes of ruling on a motion to
dismiss” (internal quotation marks omitted)). The complaint
contains such legal conclusions and presents no facts upon
which such conclusions could be reached. Because the
complaint failed to sufficiently plead a violation of § 7433(a),
the District Court correctly dismissed it.
III
For the foregoing reasons, we will affirm the District
Court’s order.
6159 for payment of such unpaid tax is pending with
the Secretary.” 26 U.S.C. § 6331(k)(2).
15