Norman v. United States

In the United States Court of Federal Claims
No. 15-872 T
(Filed April 11, 2016)
MINDY P. NORMAN, )
Plaintiff, ) Bank Secrecy Act; Subject Matter
v. ) Jurisdiction; 28 U.S.C. § 1355.
)
THE UNITED STATES, )
Defendant, )
James O. Druker, Kase & Druker, Garden City, NY, for plaintiff.
Jennifer D. Auchterlonie, Tax Division, Court of Federal Claims Division,
United States Department of Justice, Washington, D.C., with whom appeared
Caroline D. Ciraolo, Acting Assistant Attorney General. David I. Pincus, of
counsel.
OPINION
Merow, Senior Judge.
Plaintiff filed the instant complaint seeking the refund of a penalty assessed
under the Bank Secrecy Act. See Doc. 1. On or about October 29, 2013, plaintiff
was assessed a penalty in connection with her allegedly willful failure to comply
with reporting requirements relating to a Swiss bank account. See id. at 1. She
protested the assessment on January 21, 2014, and the Internal Revenue Service’s
(“IRS”) appeals office affirmed imposition of the penalty on July 6, 2015. See id.Plaintiff paid the penalty in full, and then filed both a claim for refund with the IRS
and this action before the court. See id. at 2.
The government has moved to dismiss the complaint on the basis that this
court lacks subject matter jurisdiction. See Doc. 7. Prior to reaching the merits of
her claim, plaintiff must, as a threshold matter, carry the burden of establishing this
court’s jurisdiction. See Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746,
748 (Fed. Cir. 1988) (stating that plaintiff “bears the burden of establishing subject
matter jurisdiction by a preponderance of the evidence”). “Should the court find that
it lacks subject matter jurisdiction to decide a case on its merits, it is required either
to dismiss the action as a matter of law, or to transfer it to another federal court that
would have jurisdiction.” Travelers Indem. Co. v. United States, 72 Fed. Cl. 56, 59-
60 (2006) (citing Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1868); Thoen v.
United States, 765 F.2d 1110, 1116 (Fed.Cir.1985); and Gray v. United States, 69
Fed.Cl. 95, 102–03 (2005)).
The government argues that this court lacks authority to consider plaintiff’s
case because the district courts of the United States hold exclusive jurisdiction over
cases involving penalties, such as the one at issue here. See Doc. 7. The Court of
Federal Claims is a court of limited jurisdiction, the scope of which is set out by the
Tucker Act:
The United States Court of Federal Claims shall have jurisdiction to
render judgment upon any claim against the United States founded
either upon the Constitution, or any Act of Congress or any regulation
of an executive department, or upon any express or implied contract
with the United States, or for liquidated or unliquidated damages in
cases not sounding in tort.
28 U.S.C. § 1491(a)(1). This grant of jurisdiction applies to claims “for recovery of
monies that the government has required to be paid contrary to law.” Aerolineas
Argentinas v. United States, 77 F.3d 1564, 1572 (Fed. Cir. 1996). Such a claim
“may be maintained when ‘the plaintiff has paid money over to the Government,
directly or in effect, and seeks return of all or part of that sum’ that ‘was improperly
paid, exacted, or taken from the claimant in contravention of the Constitution, a
statute, or a regulation.’” Id. at 1572-73 (citing Eastport S.S. Corp. v. United States,
178 Ct. Cl. 599, 605 (1967)).
Plaintiff claims that the court’s jurisdiction here rests on this principle, but
also acknowledges that jurisdiction is limited in cases “where Congress has
expressly placed jurisdiction elsewhere.” S. Puerto Rico Sugar Trading Corp. v.
United States, 167 Ct. Cl. 236, 244 (1964); see also Doc. 8 at 5. The government
argues that Congress has, in fact, placed jurisdiction elsewhere, by way of 28 U.S.C.
§ 1355. The statute states, in relevant part:
The district courts shall have original jurisdiction, exclusive of the
courts of the States, of any action or proceeding for the recovery or
enforcement of any fine, penalty, or forfeiture, pecuniary or otherwise,
incurred under any Act of Congress, except matters within the
jurisdiction of the Court of International Trade under section 1582 of
this title.
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28 U.S.C. § 1355(a). According to the government, “[b]y its terms, section 1355
applies to this case, inasmuch as this is an action for the recovery of a penalty.” See
Doc. 7 at 10. 1
The government’s position rests almost entirely on the Federal Circuit’s
holding in Crocker v. United States, 125 F.3d 1475 (Fed. Cir. 1997). In Crocker,
after local authorities seized currency and savings bonds from the plaintiff, the Drug
Enforcement Agency instituted forfeiture proceedings. See Crocker, 125 F.3d at
1475-76. The bonds were later administratively forfeited, and plaintiff sued to
recover her property. See id. at 1476. The court held that it was lacking jurisdiction
under several theories of recovery, including the theory that the government’s
actions amounted to an illegal exaction. See id. at 1477. The court affirmed the
Court of Federal Claims’ ruling that it lacked jurisdiction:
The Tucker Act provides jurisdiction in the Court of Federal Claims to
recover “exactions said to have been illegally imposed by federal
officials (except where Congress has expressly placed jurisdiction
elsewhere).” Aerolineas Argentinas v. United States, 77 F.3d 1564,
1572-73 (Fed. Cir. 1996) (citing South Puerto Rico Sugar Trading
Corp. v. United States, 167 Ct. Cl. 236, 334 F.2d 622, 626 (1964)).
Congress has unambiguously allocated these judicial activities to the
district courts. See 28 U.S.C. § 1355(a) (1994); United States v. King,
395 U.S. at 2-3.
Id.
On the basis of this passage, the government argues that this court should
expand the Crocker ruling to preempt jurisdiction in cases involving not only
forfeitures, but anything that can be characterized as a penalty. “In short, the Federal
Circuit’s holding in Crocker makes clear that Tucker Act jurisdiction with respect
1
The court notes that the plain language of this statute does not necessarily indicate that the Court
of Federal Claims lacks jurisdiction. It is clear that district courts have original jurisdiction, and
that state courts have no jurisdiction, but it simply does not explicitly address the authority of other
federal courts. In several cases, this court has interpreted the phrase “original jurisdiction” to mean
exclusive jurisdiction. See Pereira v. United States, 84 Fed. Cl. 597, 600 (2008) (“A grant of
‘original jurisdiction’ to the district courts has been construed to confer exclusive jurisdiction and
preclude suit in this forum.”) (collecting cases). But at least one federal appellate court has come
to the opposite conclusion with regard to 28 U.S.C. § 1355. See United States v. Plainbull, 957
F.2d 724, 726 (9th Cir. 1992) (“Section 1355 only grants the district court original jurisdiction
‘exclusive of the courts of the States,’ not exclusive of all other courts that would otherwise have
had jurisdiction.”). The Federal Circuit has, apparently, not addressed this issue.
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to illegal exactions neither overlaps nor is coextensive with district court jurisdiction
under section 1355 to hear ‘any action or proceeding’ with respect to the recovery
of ‘any fine, penalty, or forfeiture.’” Doc. 7 at 13. A careful reading of Federal
Circuit precedent, however, belies that conclusion.
The year after deciding the Crocker case, the Federal Circuit issued its opinion
in San Huan New Materials High Tech, Inc. v. Int’l Trade Comm’n, 161 F.3d 1347(Fed. Cir. 1998). San Huan involved an appeal of certain penalties imposed on
plaintiffs by the United States International Trade Commission. Plaintiffs
contended, among other things, that the Commission lacked authority to assess the
penalties because 28 U.S.C. § 1355 granted the district courts the exclusive authority
to do so. See id. at 1351. In response to this argument, the Federal Circuit explained:
Section 1355 of 28 U.S.C. does not create a presumption that district
courts must uniquely determine and assess, as well as enforce, all civil
penalties. See 13B CHARLES ALAN WRIGHT & ARTHUR R. MILLER,
FEDERAL PRACTICE AND PROCEDURE § 3578 (1984 & Supp.1998)
(Section 1355 has “little if any present utility” and is “more a source of
confusion that [sic] anything else”); see also Lawrence v. Commodity
Futures Trading Comm’n, 759 F.2d 767, 771 (9th Cir.1985) (“§ 1355
gives the district courts original jurisdiction over court actions brought
to reduce fines to judgment”) (emphasis added).
Id. Thus, although the case at bar is different in many respects, the San Huan opinion
provides meaningful insight into the Federal Circuit’s interpretation of section 1355
outside of the forfeiture context.
The Circuit’s statement in San Huan, that section 1355 was not meant to give
district courts exclusive jurisdiction in all penalty cases, is also bolstered by the
Court of Claims’ decision in Mallow v. United States, 161 Ct. Cl. 446 (1963). In
Mallow, the Court of Claims found that it had jurisdiction to consider plaintiff’s
claim to recover fines that were allegedly illegally imposed in connection with a
court martial under 28 U.S.C. § 1491. See id. Although the court did not discuss
section 1355 in Mallow, the same operative language appeared in the version of the
statute which was in force when the court decided Mallow in 1963.
Even absent explicit proscription of this court’s authority, however, the
Federal Circuit and the Supreme Court of the United States have frequently held that
when a “‘specific and comprehensive scheme for administrative and judicial review’
is provided by Congress, the Court of Federal Claims’ Tucker Act jurisdiction over
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the subject matter covered by the scheme is preempted.” Vereda, Ltda. v. United
States, 271 F.3d 1367, 1375 (Fed. Cir. 2001) (citing St. Vincent’s Med. Ctr. v. United
States, 32 F.3d 548, 549–50 (Fed. Cir.1994)); see also, e.g., United States v. Bormes,
133 S. Ct. 12 (2012) (Fair Credit Reporting Act); United States v. Fausto, 484 U.S.
439, 453–54, (1988) (Civil Service Reform Act); Lion Raisins, Inc. v. United States,
416 F.3d 1356, 1372 (Fed. Cir. 2005) (Agricultural Marketing Agreement Act); Tex.
Peanut Farmers v. United States, 409 F.3d 1370 (Fed. Cir. 2005) (no Tucker Act
jurisdiction over claim for breach of crop insurance contract); Wilson v. United
States, 405 F.3d 1002 (Fed. Cir. 2005) (Social Security Act and Medicare); see also
Massie v. United States, 166 F.3d 1184, 1188 (Fed. Cir. 1999) (“[A] contract will
not fall within the purview of the Tucker Act if Congress has placed jurisdiction over
it elsewhere.”).
The government has not presented any argument or evidence suggesting that
the Bank Secrecy Act contains a scheme for review sufficient to preempt Tucker Act
authority. Rather, the government urges the court, on the basis of two Court of
Federal Claims cases, to hold that “Tucker Act jurisdiction [is] preempted because
section 1355 provides a specific and comprehensive scheme for judicial review.”
Doc. 7 at 10.
To support its position, the government first points to Wayne ex rel. MYHUB
Grp., LLC v. United States, 95 Fed. Cl. 475, 478 (2010), a case involving a challenge
to a civil forfeiture. In Wayne, the court cited Crocker, stating that “‘Congress has
unambiguously allocated’ exclusive jurisdiction to the federal district courts for
claims seeing [sic] the recovery of property taken pursuant to federal civil forfeiture
proceedings.” Wayne, 95 Fed. Cl. at 478. The court ultimately held that Tucker Act
jurisdiction was preempted on the basis that section 1355(c) provided a
comprehensive review scheme. See id. This case, of course, deals with section
1355(a), not 1355(c).
The government then looks to Elliott v. United States, 96 Fed. Cl. 666 (2011),
in which the plaintiff sought to recover funds withheld from his Social Security
payments pursuant to the Federal Debt Collection Procedure Act. Plaintiff’s debt
resulted from a judgment against him related to criminal convictions on seventy
counts, including securities fraud, mail fraud, tax evasion, and racketeering. Id. at
667. The court described the nature of plaintiff’s claim as follows: “plaintiff is
challenging whether the Government procedurally complied with the forfeiture laws,
i.e., whether the Attorney General took necessary steps to prevent the judgment from
expiring, or whether, in the absence of the required action, the Government now is
foreclosed from retaining part of his Social Security payments.” Elliott, 96 Fed. Cl.
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at 670. The court then observed that: “[t]he judgment, derived from fines and
forfeitures resulting from criminal convictions, is exactly the type of monetary
obligation that § 1355 was intended to reach, and not an example of a civil dispute
of an illegal exaction that classically comes within the jurisdiction of the Court of
Federal Claims.” Id.
The fact that Elliott involved fines related to criminal convictions is an
obvious distinction from the case at bar. And the genesis of the claims in Elliott
mattered to the court. The court specifically concluded that Tucker Act jurisdiction
was preempted:
The broad language of § 1355(a), taken together with the gravamen of
plaintiff’s cause of action, dictates that plaintiff’s challenge to the
Government’s ability to recover the debt that plaintiff owes properly
should be brought before a federal district court, as it is ultimately a
“proceeding” that adjudicates the Government’s right to “recovery or
enforcement” of the 1989 judgment against plaintiff. To hold otherwise
would undermine the purpose of § 1355 and negate Congress’s
commitment of such actions to federal district courts.
Id. at 671 (emphasis added).
This case does not involve a forfeiture action, it does not involve criminal
convictions, and it does not implicate the government’s efforts to recover funds, as
the plaintiff has already paid the penalty at issue, in full. In addition, the government
has made no argument and presented no evidence that the Bank Secrecy Act contains
a comprehensive review scheme sufficient, on its own, to preempt this court’s
jurisdiction.
While there is obvious tension between section 1355(a) and the scope of
Tucker Act jurisdiction, the court does not believe that Federal Circuit precedent
supports the blanket preemption of Tucker Act jurisdiction in all penalty cases for
which the government argues. The court does acknowledge, however, that
substantial ground for difference of opinion on this controlling question of law
exists, so that an interlocutory appeal pursuant to 28 U.S.C. § 1292(d)(2) may
materially advance the ultimate termination of the litigation.
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The government’s motion to dismiss is, hereby, DENIED.
SO ORDERED.
s/ James F. Merow
James F. Merow,
Senior Judge
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