Hassen v. Gov't of the V.I.

• Citation: 861 F.3d 108
• Decision Date: 26 June 2017
• Docket Number: No. 16-2209,16-2209
• Parties: *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
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

861 F.3d 108

*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

No. 16-2209

United States Court of Appeals, Third Circuit.

Argued May 2, 2017

Filed: June 26, 2017

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

Before: GREENAWAY, JR., SHWARTZ, and FUENTES, Circuit Judges.

OPINION

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 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, 2013² , the Hassens submitted letters requesting an installment agreement to satisfy their 2004 tax debt.³ The December 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.

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, 118 S.Ct. 1003, 140 L.Ed.2d 210 (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, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ). To avoid this confusion, the Court established the 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, 126 S.Ct. 1235 (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, 130 S.Ct. 1237, 176 L.Ed.2d 18 (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, 114 S.Ct. 1483, 128 L.Ed.2d 229 (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 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. Trans W orld Airlines , 455 U.S. 385, 394, 102 S.Ct. 1127, 71 L.Ed.2d 234 (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, 130 S.Ct. 1237 ); 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 , 559 U.S. at 169, 130 S.Ct. 1237, 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...