We again welcome Carl Smith. Today he writes about a case he has discussed before and one that bears a close watch for anyone with a statute of limitations issue. Keith
In a previous post, I noted how on January 30 of this year a 3-judge panel of the 9th Circuit in Volpicelli v. U.S., 777 F.3d 1042, reaffirmed what the Circuit had held 20 years before in Capital Tracing, Inc. v. U.S., 63 F.3d 859, 861-62 (9th Cir. 1995), and Supermail Cargo v. U.S., 68 F.3d 1204, 1206-07 (9th Cir. 1995) — (1) that the 9-month period in section 6532(c) in which to bring a wrongful levy suit under section 7426 is not “jurisdictional” and (2), applying the presumption in favor of tolling non-jurisdictional statutes of limitations involving the government announced in Irwin v. Dept. of Veterans Affairs, 498 U.S. 89 (1990), the 9-month period at section 6532(c) was subject to equitable tolling. Irwin had overturned long-standing Supreme Court precedent holding that time limits, as parts of waivers of sovereign immunity, must be construed to exclude equitable tolling. Irwin held, instead, that the same rebuttable presumption in suits among private litigants that statutes of limitations could be subject to equitable tolling applied in analogous suits involving the United States. In my post, I predicted that the government would not want to live with the Volpicelli panel’s ruling and would try to take the Volpicelli case to the Supreme Court. Keith was quoted in an article in Tax Notes Today to the effect that “the allegations in Volpicelli, should they be proven or accepted as true, make it a potentially challenging case for the government. The government might prefer to find a case with more favorable facts to take to the Supreme Court.” 2015 TNT 22-9 (Feb. 3, 2015). I agree with Keith. But, the government did not listen to Keith. Instead, it has embarked on a road likely leading to the Supreme Court. On March 16, it filed a request for an en banc rehearing of Volpicelli by the 9th Circuit, a copy of which can be found here. The grounds for rehearing are a nominal Circuit split on this issue and the alleged administrative nightmare for the government if it had to deal with so many suits that would be triggered by this ruling where plaintiffs would now argue for equitable tolling.
I have been an amicus in support of the plaintiff in the Volpicelli case, so I am tempted to refute, point-by-point, all the arguments made by the government in seeking rehearing. I will resist that temptation, but only say that any arguments the government made in its rehearing request are not new, and though the panel did not address all of the arguments in its opinion, answers to all those arguments can be found in the plaintiff’s briefs (ably done pro bono by Brian Goldman and colleagues at Orrick).
There are two points that I want to address, though: The administrative nightmare argument and the existence of a live Circuit split. In fact, neither argument really holds water.
U.S. v. Brockamp, 519 U.S. 347 (1997), concerned whether the 3-year period in which to file an administrative refund claim under section 6511 was subject to equitable tolling. There, the Court held that, even if one applied the Irwin presumption to this period (which was not for a court filing, but for a filing in an agency), several factors overcame the presumption. One of those factors was a possible administrative nightmare. The Court wrote:
The IRS processes more than 200 million tax returns each year. It issues more than 90 million refunds. See Dept. of Treasury, Internal Revenue Service, 1995 Data Book 8-9. To read an “equitable tolling” exception into §6511 could create serious administrative problems by forcing the IRS to respond to, and perhaps litigate, large numbers of late claims, accompanied by requests for “equitable tolling” which, upon close inspection, might turn out to lack sufficient equitable justification. See H. R. Conf. Rep. No. 356, 69th Cong., 1st Sess., 41 (1926) (deleting provision excusing tax deficiencies in the estates of insane or deceased individuals because of difficulties involved in defining incompetence). The nature and potential magnitude of the administrative problem suggest that Congress decided to pay the price of occasional unfairness in individual cases (penalizing a taxpayer whose claim is unavoidably delayed) in order to maintain a more workable tax enforcement system. At the least it tells us that Congress would likely have wanted to decide explicitly whether, or just where and when, to expand the statute’s limitations periods, rather than delegate to the courts a generalized power to do so wherever a court concludes that equity so requires. [Id. at 352-353]
In its Volpicelli rehearing request, the DOJ writes (at p. 2) that “[t]he case . . . has substantial administrative importance. The Internal Revenue Service (IRS) has informed us that, in 2013 and 2014, it served nearly 2 million levies per year, for an annual yield of about $2.5 billion in collected proceeds. The panel’s holding invites a parade of lawsuits against the Government by third parties alleging stale claims to property levied upon by the IRS to collect unpaid taxes owed by delinquent taxpayers, in direct contravention of the clear statutory intent to provide certainty.”
But the mention of this 2 million annual levies is misleading. The real issue is how many additional wrongful levy suits would be filed if equitable tolling continued to be allowed in the 9th Circuit, as it has been over the last 20 years. The statement of the question indicates the answer: There will be no additional suits in the 9th Circuit raising equitable tolling, since equitable tolling has been permitted there all along this past 20 years.
Then, the next question should be: If the 9th Circuit’s holding were spread countrywide, would there be more wrongful levy suits brought in other Circuits where equitable tolling was sought? Well, the plaintiff’s lawyers in Volpicelli looked into how many wrongful levy suits were brought countrywide in the five calendar years preceding the filing of the plaintiff’s opening brief in 2014 (i.e., for the calendar years 2009-2013). They found an average of 37 wrongful levy suits annually in the whole country. Opening brief at 32 n. 5. They also found that in the 20 years after the Capital Tracing and Supermail Cargo rulings allowing for tolling in the 9th Circuit, only 5 reported district court opinions in the 9th Circuit (one of them being Volpicelli) considered equitable tolling — or about one opinion every 4 years in the 9th Circuit’s district courts. Id. at 35-36 (citing opinions). If we were to assume that the 9th Circuit had only 10% of the country’s population (it has more, in fact), then this would suggest that one could expect 10 times as many such suits if the rest of the country allowed equitable tolling like the 9th Circuit — i.e., 50 suits in 20 years or 2.5 suits raising equitable tolling in the whole country, on average, in any year. Does 2.5 more suits a year constitute a “parade of lawsuits . . . alleging stale claims”? I think not.
Turning to the alleged Circuit split on whether section 6532(c) may be equitably tolled, the DOJ wrote:
Not only is the panel’s holding in substantial tension with United States v. Brockamp, . . ., but it is also in direct conflict with Becton Dickinson and Co. v. Wolckenhauer, 215 F.3d 340 (3d Cir. 2000), where the Third Circuit, relying on Brockamp, held that § 6532(c) is jurisdictional and cannot be equitably tolled. The panel’s decision also conflicts with the decisions of a host of other circuits which have refused to consider wrongful levy claims brought more than 9 months after the levy was made. See Miller v. Tony & Susan Alamo Found., 134 F.3d 910, 916 (8th Cir. 1998); Amwest Sur. Ins. Co. v. United States, 28 F.3d 690, 691 (7th Cir. 1994); Williams v. United States, 947 F.2d 37, 39-40 (2d Cir. 1991); Diekmann v. United States, 550 F.2d 622, 623 (10th Cir. 1977). Accord Compagnoni v. United States, 173 F.3d 1369, 1370 n. 3 (11th Cir. 1999).
Let’s look a bit more closely at this alleged Circuit split:
First, none of the cases cited by the DOJ except Becton Dickinson even discuss Irwin or equitable tolling. The opinions from outside the 3d Circuit only hold that a late-filed wrongful levy suit should be dismissed for lack of jurisdiction — citing the limited sovereign immunity construction of time limits that was rejected by the Supreme Court in Irwin. So, all those opinions are incompatible with Irwin and are not currently good law. (It is embarrassing that the courts deciding three of these cases after Irwin did not even note Irwin.)
Moreover, Becton Dickinson, which was decided after Irwin, and held that the section 6532(c) time period is jurisdictional, did so by using the expansive version of “jurisdictional” that the Supreme Court has more recently rejected. In recent cases, the Supreme Court has admitted that both it and lower courts previously overused the word “jurisdictional”, and henceforth “jurisdictional” should be reserved for subject-matter and personal jurisdiction, but not claims processing rules — unless Congress makes very clear that it, unusually, wants a claims processing rule like a time period to be jurisdictional. See, e.g., Henderson v. Shinseki, 131 S. Ct. 1197, 1202-03 (2011) (“Because the consequences that attach to the jurisdictional label may be so drastic, we have tried in recent cases to bring some discipline to the use of this term. We have urged that a rule should not be referred to as jurisdictional unless it governs a court’s adjudicatory capacity, that is, its subject-matter or personal jurisdiction. Other rules, even if important and mandatory, we have said, should not be given the jurisdictional brand.” Citations omitted).
The “jurisdictional” aspect of Becton Dickinson is clearly incompatible with current Supreme Court case law.
Further, Becton Dickinson also predicated its no-tolling ruling on the assumption that the Irwin presumption in favor of tolling statutes of limitation could not apply if a suit could only be brought against the government (as opposed to the situation in Irwin, where the employment discrimination suit was the kind of suit that could be brought against private parties or the government). The 3d Circuit wrote:[L]ike the time limitation at issue in Brockamp, but unlike the time limitation at issue in Irwin, the time limitation in section 6532(c) applies only to suits brought against the government and not suits brought against private defendants. Indeed, section 7426(a)(1), which section 6532(c) modifies, authorizes only suits against the government. Thus, Irwin‘s “rebuttable presumption” does not apply; “makingthe rule of equitable tolling applicable to suits against the Government, in the same way that it is applicable to private suits” has no meaning in the context of a statute that creates only a cause of action against the government. [215 F.3d at 348-349]
This reasoning has also been rejected by the Supreme Court more recently. In Scarborough v. Principi, 541 U.S. 401, 422 (2004), the Supreme Court suggested that Irwin does not “demand a precise private analogue” for its presumption to apply to suits against the government. The Court wrote that “[l]itigation against the United States exists because Congress has enacted legislation creating rights against the Government, often in matters peculiar to the Government’s engagements with private persons . . . Because many statutes that create claims for relief against the United States or its agencies apply only to Government defendants, Irwin‘s reasoning would be diminished were it instructive only in situations with a readily identifiable private-litigation equivalent.” Id. For this reason, the Supreme Court more recently found — applying the Irwin presumption — that a one-year period in which to file in federal court for habeas review in death penalty cases was subject to equitable tolling — even though such a suit could naturally only be brought against the government. Holland v. Florida, 560 U.S. 631 (2010).
In short, the opinions from other Circuits that the DOJ cites to create a Circuit split in Volpicelli have been completely sapped of their vitality, such that even a 3-judge panel in each of those other Circuits would be able to ignore the cited opinions as incompatible with current Supreme Court case law. How do these ghost opinions create a Circuit split?
Now, don’t get me wrong: I regret that Logan Volpicelli is being delayed in getting his college money back, but I actually am happy that the government is continuing to pursue this case — probably to the Supreme Court. Unless the Supreme Court overturns a decade of its recent case law, I am pretty sure that the Supreme Court will rule that section 6532(c) is subject to equitable tolling. I would love such a holding — not because I think it will benefit many people bringing wrongful levy suits, but because such a ruling will call into question whether many other time periods in the Internal Revenue Code are subject to equitable tolling.
Indeed, I think this is the government’s real fear about Volpicelli. It isn’t the fear of lots of late wrongful levy suits worrying the government, but of late other suits — such as refund lawsuits brought after the end of the 2-year period after claim disallowance found in section 6532(a) and maybe some late suits brought in the Tax Court. The government doesn’t want equitable tolling to spread throughout the Tax Code, so it is making a stand here with Volpicelli. We’ll now see if this is a Last Stand, like Custer’s.