Courtney v. United States

Case: 22-60131 Document: 00516461225 Page: 1 Date Filed: 09/06/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
September 6, 2022
No. 22-60131
Lyle W. Cayce
Summary Calendar
Clerk
Gregory Courtney,
Plaintiff—Appellant,
versus
United States of America,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 3:21-CV-589
Before Stewart, Duncan, Wilson, Circuit Judges.
Per Curiam:*
In this appeal arising from a taxpayer liability dispute, Gregory
Courtney (“Courtney”) appeals the district court’s order granting the
Government’s motions to dismiss. Because we hold that the district court
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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No. 22-60131
lacked subject matter jurisdiction over this matter and the Anti-Injunction
Act (“AIA”) 1 prevents equitable relief, we affirm.
I. Background
From 2000 to 2004, Courtney was an engineer for Shell Deepwater
Development, Inc. (“Shell”). At Shell, he was responsible for approving
expenses related to offshore oil well services. On or around April of 2000,
Courtney took control of Mercury Equipment and Services Inc. (“MES”).
MES was an oil field related company that contracted with Shell. Courtney
began using the MES account to pay his personal expenses and then directed
Shell to reimburse MES for those payments, under the guise of Shell’s
payment for MES’s services. In sum, Courtney misappropriated at least $1.3
million from Shell between 2000 to 2004. Moreover, he failed to report any
of these payments as income when filing taxes in 2001, 2002, and 2003.
The Government indicted Courtney in 2008 for one count of income
tax evasion for the 2001 tax year and one count of mail fraud for a fraudulent
invoice that he submitted to Shell in 2004.2 Courtney pled guilty to both
counts. And in 2009, the court sentenced him to pay roughly $1.8 million of
restitution. The IRS was entitled to approximately $500,000 of the $1.8
million restitution award and the remaining $1.3 million was allocated to
Shell. The district court ordered Courtney to pay restitution at a rate of
$1,000 per month, subject to increases or decreases depending on his ability
to pay. The order also provided that each non-federal recipient would be paid
restitution first. Consequently, the IRS’s 2012 Notice of Deficiency
1
Prohibition of Suits to Restrain Assessment or Collection, 26 U.S.C. § 7421 et seq.
(2018).
2
The original indictment consisted of three counts of income tax evasion in
violation of 26 U.S.C. § 7201. However, a superseding indictment dropped two of the
income tax evasion counts and added the mail fraud count.
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informed Courtney that all restitution payments were being allocated to Shell
and not the IRS. After appealing the Notice of Deficiency, Courtney was left
with a total of over $1.4 million owed to the IRS for the 2001 tax year and
about $800,000 for subsequent years that he failed to pay income taxes.
The IRS has taken multiple measures in attempting to collect
restitution from Courtney. These measures include a 2009 levy on
Courtney’s personal individual retirement account, a notice of a federal tax
lien on all real property and other assets, and an attempt to seize assets from
an irrevocable trust which benefits his wife and children. Additionally, the
IRS pursued collections against two limited liability companies that were
affiliated with Courtney—LLOG Program 2007-2008, L.L.C. (“LLOG”)
and Oil & Gas Consultants E & P, L.L.C. (“OGC”). The IRS issued a Notice
of Intent to Levy to LLOG, and successfully levied over $50,000 from the
business checking account of OGC.
In September 2021, Courtney filed suit against the Government in the
federal district court for the Southern District of Mississippi. Courtney
pursued three forms of relief. First, he sought damages for the collection
actions filed again him. Second, he sought an accounting of all funds that the
IRS collected from him and how they were applied. And third, he sought an
injunction barring further collection actions against him and preventing the
IRS’s continued collection efforts against LLOG, OGC, and the irrevocable
trust.
The Government moved to dismiss Courtney’s complaint, pursuant
to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), countering with its
own three claims regarding damages. First, it contended that Courtney failed
to exhaust administrative remedies prior to filing his complaint. Second, that
Courtney failed to identify any relevant law that the Government violated.
And third, that Courtney lacked standing to challenge the levies listed in his
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complaint. It then argued that Courtney’s request for injunctive relief could
not be maintained under the AIA because he sought only to restrain the
collection of a federal tax.
Courtney contended that he should be excused from the exhaustion
requirement on futility grounds due to the lack of communicativeness by the
IRS prior to his filing his complaint. As to the injunction issue, Courtney
claimed that he fell within the narrow exception recognized in Enochs v.
Williams Packing, 370 U.S. 1 (1962) because he was certain the Government
stood no chance of success on the merits and equitable jurisdiction otherwise
existed.
The district court granted both of the Government’s motions on
grounds that it lacked subject matter jurisdiction over the dispute because
Courtney failed to exercise his administrative remedies. The district court
further noted that Courtney’s futility grounds were not an adequate excuse
for circumventing exhaustion. The district court then rejected Courtney’s
request for an injunction because the AIA barred it and he did not qualify for
the Williams Packing exception.
On appeal, Courtney argues that the district court erred in
determining it lacked subject matter jurisdiction over his damages claim and
in holding that his injunction request was barred by the AIA. We disagree.
II. Standard of Review
We review a district court’s motion to dismiss for lack of subject
matter jurisdiction de novo. T. B. by & through Bell v. Nw. Indep. Sch. Dist.,
980 F.3d 1047, 1050 (5th Cir. 2020). “We take the well-pled factual
allegations of the complaint as true and view them in the light most favorable
to the plaintiff.” Id. (quoting Lane v. Haliburton, 529 F.3d 548 (5th Cir.
2008)).
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We review a district court’s order granting a motion to dismiss for
failure to state a claim de novo. Calogero v. Shows, Cali & Walsh, L.L.P., 970
F.3d 576, 580 (5th Cir. 2020). “We accept all well-ple[d] facts in the
complaint as true and view the facts in the light most favorable to the
plaintiff.” O’Daniel v. Indus. Serv. Sols., 922 F.3d 299, 304 (5th Cir. 2019).
“However, those facts, taken as true, [must] state a claim that is plausible on
its face.” Id. (quoting Bowlby v. City of Aberdeen, Miss., 681 F.3d 215, 219 (5th
Cir. 2012)). “A claim has facial plausibility when the plaintiff pleads 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(2009).
III. Discussion
A. Subject Matter Jurisdiction
Section 7433(a) of the Internal Revenue Code provides that:
If, in connection with any collection of Federal tax
with respect to a taxpayer, any officer or employee of
the Internal Revenue Service recklessly or
intentionally, or by reason of negligence, disregards
any provision of this title, or any regulation
promulgated under this title, such taxpayer may bring
a civil action for damages against the United States in
a district court of the United States.
See 26 U.S.C. § 7433(a). This provision operates as a Congressional waiver
of sovereign immunity for taxpayers seeking damages against the IRS.
However, this section provides that “a judgment for damages shall not be
awarded. . . unless the court determines that the plaintiff has exhausted the
administrative remedies available.” 26 U.S.C. § 7433(d). 26
C.F.R. § 301.7433 stipulates the requirements to successfully exhaust
administrative remedies. See Glass v. United States, 71 F. App’x 442, 442 (5th
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Cir. 2003) (noting that plaintiffs must “file an administrative claim and wait
six months before bringing an action in district court. The claim must be in
writing and signed by the taxpayer or his authorized representative and must
state: the taxpayer’s name and address; the grounds for the claim; a
description of injuries; and the dollar amount of the claim”).
We must dismiss suits on jurisdictional grounds if a taxpayer fails to
comply with these “specific and straightforward instructions.” Lapaglia v.
Richardson, 68 F.3d 466, 466 (5th Cir. 1995); see also Glass, 71 F. App’x at 442
(holding that “when a plaintiff suing the United States has failed to satisfy
the terms of a waiver provision, the court lacks jurisdiction”).
Plaintiffs may survive a failure to exhaust administrative remedies
“only in extraordinary circumstances.” Info. Res., Inc. v. United States, 950
F.2d 1122, 1127 (5th Cir. 1992). Such circumstances can arise when
administrative exhaustion would be futile. Id. at 1126–27. However, this court
has held that discretion to circumvent exhaustion “is severely limited” when
exhaustion is a statutory requirement of relief. Id. at 1126. We have also held
that an agency should generally be afforded the opportunity to “correct its
own errors.” Power Plant Div., Brown & Root, Inc. v. Occupational Safety &
Health Rev. Comm’n, 673 F.2d 111, 114 (5th Cir. 1982). Consequently, where
an agency is “empowered to accept” a plaintiff’s claim, “probable futility”
is an inadequate ground for circumventing exhaustion requirements. Id. at
114–15.3
First, we address Courtney’s claim that the district court erred in
declaring it lacked subject matter jurisdiction because he failed to exhaust all
administrative remedies. While Courtney concedes that he failed to file an
3
See Power Plant, 673 F.2d at 115 (Noting that “where the [agency] would be
without power or authority to act. . . an extraordinary circumstance might exist.”).
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administrative claim in accordance with the requirements set forth in 26
C.F.R. § 301.7433–1(e), he contends that this was excusable because the
Government effectively foreclosed his access to administrative remedies by
continuously refusing to work with him. Otherwise put, Courtney claims the
Government rendered his efforts futile.
Both parties primarily rely on Information Resources, Inc. v. United
States in arguing futility. 950 F.2d 1122. There, Information Resources sued
the Government to recover damages for allegedly erroneously filing tax liens
and for failure to issue timely release of those liens. Info. Res., 950 F.2d at
1122. The court noted that “the administrative procedure. . . is normally
adequate,” but the IRS was wholly responsible for its inadequacy by placing
the liens on Information Resources, only to remove them before it could bring
a claim. Id. at 1126. Moreover, Information Resources went as far as reaching
out to the IRS “in an attempt to ascertain the proper procedures to follow.”
Id. The court reasoned that Information Resource’s intentional outreach
demonstrated a good faith effort to comply with the administrative
procedural requirements. Ultimately, the court held that “[r]equiring
Information Resources to exhaust the administrative procedures would be a
useless formality” because the only remedy that the IRS could provide was
release of the liens, which it had already done. Id. Thus, the remaining
remedy for Information Resources was the right to file suit for damages
against the IRS. Id.Here, the evidence demonstrates that Courtney cannot maintain a
futility argument to evade 26 U.S.C. § 7433(a)’s procedural requirements.
Courtney contends that the IRS has been unresponsive, difficult to work
with, and disingenuous of previous arrangements agreed upon by the parties.
While all of this may be true, it carries no legal significance as to whether he
must exhaust his administrative remedies in accordance with statutory law.
As Information Resources, Inc. v. United States demonstrates, Courtney only
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succeeds on his futility argument if he can prove that the IRS’s conduct
rendered his administrative remedies a “useless formality.” Id. at 1126.
Nothing in the record suggests that the Government has stopped attempts to
seize funds from the irrevocable trust fund, removed any liens from
Courtney’s real or personal property, or forgiven any of the tax debt that he
owes to the IRS. Moreover, Courtney has failed to make any good faith efforts
to comply with § 7433(a)’s procedures—ignoring its clear procedural
mandates and instead prompting the exact type of litigation the provision
contemplates avoiding. To be clear, the procedural requirements here are not
useless because there are remedies the IRS can provide if Courtney files an
administrative claim. Because the Government has not rendered Courtney’s
administrative remedies futile, we affirm the district court’s holding that it
lacked jurisdiction over his claims for damages under § 7433(a).
B. Injunctive Relief
We now turn to whether the AIA bars Courtney’s claim for injunctive
relief. We conclude that it does. The AIA provides that “no suit for the
purpose of restraining the assessment or collection of any tax shall be
maintained in any court by any person, whether or not such person is the
person against whom such tax was assessed.” 26 U.S.C. § 7421. The
Supreme Court has interpreted this provision to protect the Government’s
“need to assess and collect taxes as expeditiously as possible with a minimum
of preenforcement judicial interference, and to require that the legal right to
the disputed sums be determined in a suit for refund.” Bob Jones Univ. v.
Simon, 416 U.S. 725, 736 (1974) (internal citation and quotations omitted).
“In considering a suit’s purpose, we inquire not into a taxpayer’s subjective
motive, but into the action’s objective aim—essentially, the relief the suit
requests.” CIC Servs., L.L.C. v. Internal Revenue Serv., 141 S. Ct. 1582, 1589
(2021).
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In Enochs v. Williams Packing, the Supreme Court carved out a narrow
exception to the AIA, which applies only if “(1) it is clear that under no
circumstances could the Government ultimately prevail. . . [and] (2) equity
jurisdiction otherwise exists.” 370 U.S. at 7. The first prong requires that the
plaintiff have a “certainty of success on the merits.” Bob Jones Univ., 416
U.S. at 737. Additionally, our evaluation at the first stage requires that we
provide the “most liberal view of the law and the facts” to the Government.
Williams Packing, 370 U.S. at 7. The second prong requires the plaintiff to
prove that equity jurisdiction exists. To do so, a plaintiff must show that
irreparable harm will occur absent an injunction, “that is, harm for which
there is no adequate remedy at law.” Daniels Health Scis., L.L.C. v. Vascular
Health Scis., L.L.C., 710 F.3d 579, 585 (5th Cir. 2013).
Preliminarily, we must evaluate whether the Government is correct in
asserting that Courtney’s request for an injunction falls within the purview
of the AIA. We hold that it is. Objectively, Courtney’s suit requests
prevention of the collection of taxes by the Government. See CIC Servs., 141
S. Ct. at 1589. Regardless of how temporary Courtney’s request is, the nature
of it is expressly contemplated and barred by the AIA. See 26 U.S.C. §
7421(a). Since Courtney cannot avoid the AIA, he must prove that his
request fits within the narrow Williams Packing exception.
On appeal, Courtney argues that he satisfies the first prong because he
has pled that the IRS improperly levied funds from his company, retirement
plan, and continues to seek information and seize assets from an irrevocable
trust created for his family. Moreover, he argues that he satisfies this prong
by the very fact that he has made these allegations and because the IRS has
failed to refute the allegations. He relies on C.I.R. v. Shapiro, to assert that
the Government bears the burden of proving that the allegations in his
complaint are wrong. 424 U.S. 614.
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In that case, the IRS asserted that Shapiro earned substantial
unreported income and seized his assets because he was scheduled for
imminent extradition to Israel. Id. He sought to enjoin the Government’s
seizure, relying on the Williams Packing exception. He argued that he did not
actually owe any taxes, thus was certain to succeed on the merits, and that he
was entitled to equitable jurisdiction because he needed the seized funds to
make bail in Israel. Shapiro submitted discovery requests to discern the basis
for the IRS’s claim that he owed additional taxes. Id. at 620. In response, the
Government provided a notice of deficiency explaining that the additional
taxes owed stemmed from Shapiro’s alleged narcotics transactions. Id. at 621.
The Government declined to cooperate with any other discovery requests,
declaring them premature. Id. Ultimately, the Supreme Court held that
taxpayers must know the basis for the IRS’s assessment of taxes in order for
district and appellate courts to properly evaluate whether the plaintiff can
show “that the Government will certainly be unable to prevail.” Id. at 626–
27. Accordingly, while the taxpayer still bears the “ultimate burden” of
persuading the district court that “the Government will under no
circumstances prevail,” the Government necessarily has “some obligation to
disclose the factual basis for its assessments,” so that the taxpayer may
properly make its case. Id. at 626–28.
Here, both parties stipulate that the Government must prove LLOG,
OGC, or the irrevocable trust have a sufficient relationship to Courtney for
the Government to lawfully collect funds from these entities. Moreover, both
parties stipulate that this is a fact-intensive inquiry that requires an analysis
of the relationship between Courtney and each entity. However, Courtney
misapplies Shapiro in arguing that the Government must prove that it legally
sought collection from LLOG, OGC, or the irrevocable trust. Such would be
the case if the Government was in sole possession of the information
pertaining to the relationship between Courtney and the entities, but it is not.
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On the contrary, Courtney is in sole possession of the information detailing
the relationship of these businesses and the irrevocable trust. Moreover, he
has not submitted any discovery requests and the Government has not
obstructed his ability to prove that LLOG, OGC, or the irrevocable trust are
not connected to him.
On this record, Courtney has failed to plead enough facts to prove
with certainty that the Government will be unable to prevail under any
circumstance, so he does not qualify for the Williams Packing exception.
Williams Packing, 370 U.S. at 7. Furthermore, our analysis of the second
prong is unnecessary because relief may only be granted upon satisfying both
requirements. Id.The district court properly dismissed Courtney’s claim for lack of
subject matter jurisdiction. T. B. by & through Bell, 980 F.3d at 1050. It also
properly barred his injunction request in accordance with the AIA. Calogero,
970 F.3d at 580.
IV. Conclusion
For the foregoing reasons, we AFFIRM the district court’s judgment
in full.
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