Argabright v. U.S.

• Decision Date: 14 September 1994
• Docket Number: No. 93-55419,93-55419
• Citation: 35 F.3d 472
• Parties: -6350, 94-2 USTC P 50,476, 30 Fed.R.Serv.3d 764 Lee ARGABRIGHT; Norma J. Argabright, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 472

35 F.3d 472

74 A.F.T.R.2d 94-6350, 94-2 USTC P 50,476,

30 Fed.R.Serv.3d 764

Lee ARGABRIGHT; Norma J. Argabright, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

No. 93-55419.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 1, 1994.

Decided Sept. 14, 1994.

Warren Nemiroff, Beverly Hills, CA, for plaintiffs-appellants.

Gary R. Allen, Doris D. Coles, Richard Farber, and William J. Patterson, U.S. Dept. of Justice, Tax Div., Washington, DC, for defendant-appellee.

Appeal from the United States District Court For the Central District of California.

Before: D.W. NELSON and NOONAN, Circuit Judges, and KING, ^* District Judge.

D.W. NELSON, Circuit Judge:

This is an action by taxpayers seeking abatement of interest and penalty interest on the ground that IRS personnel delayed in providing them with settlement documentation that the IRS had provided to similarly situated taxpayers. The district court dismissed the action under Fed.R.Civ.P. 12(b)(6)

for failure to state a claim. We have jurisdiction under 28 U.S.C. Sec. 1291, and we affirm. We join our sister circuits in concluding that decisions to abate interest under Section 6404(e)(1) of the Internal Revenue Code are committed to agency discretion by law, precluding judicial review.

FACTUAL AND PROCEDURAL BACKGROUND

In the late 1970s and early 1980s, a number of taxpayers, including the plaintiffs in the district court action below, invested in a tax shelter known as Wilpon and claimed certain deductions against their income. The Internal Revenue Service ("IRS" or "Commissioner") disallowed the deductions, asserted a deficiency in the income taxes of the investors, and assessed interest and penalties against them. The investors filed petitions in Tax Court seeking a redetermination of the deficiencies, interest, and penalties.

According to the allegations set forth in the amended complaint of the plaintiffs, the Commissioner approved a settlement package to resolve the claims of the Wilpon investors in February 1988. The settlement provided that (1) deductions of one-half of out-of-pocket expenses would be allowed; (2) negligence penalties would be eliminated; (3) penalties under Sec. 6659 would be imposed at the rate of 15 percent, rather than 30 percent, of the understatement; and (4) penalty interest under Sec. 6621(C) would be assessed in full. In separate proceedings in April 1988 and November 1988, this settlement was reduced to stipulation for a number of the Wilpon investors. Although the court in the November 1988 proceeding indicated that the IRS should extend the same settlement terms to all other Wilpon investors, the plaintiffs here, none of whom were participants in either of the 1988 court proceedings, allegedly did not receive settlement documentation until 1991. Although all of the plaintiffs eventually settled their Tax Court proceedings by agreeing to stipulated decisions, the terms of these decisions were less favorable than those received by Wilpon investors who stipulated to the settlement reached in February 1988. After paying the amounts due under their stipulated decisions with the Commissioner, the plaintiffs filed suit in federal district court.

In their original complaint, the plaintiffs asserted:

Plaintiffs do not seek to gain a refund of all of taxes, penalties, penalty interest and interest. They simply seek, subject to proof, refund of penalty interest under Sec. 6621 and interest, paid on all the taxes for the time period of May 1988 until receipt of proper settlement documentation. This is the period that governmental delay increased billings in issue.

The government filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6), arguing that the Commissioner had no duty to abate assessments of interest attributable to delay by IRS personnel performing ministerial duties. The court granted the government's motion, but granted the taxpayers 20 days in which to file an amended complaint.

In their amended complaint, the plaintiffs asserted that they were not offered the same settlement in the Tax Court as were other Wilpon investors, and, on this basis, requested a refund of amounts paid in excess of what they would have paid had they been parties to the February 1988 settlement. The amended complaint further specified that one group of plaintiffs never received the settlement documentation. These plaintiffs sought a refund of "the difference between concession and the settlement proposal they never saw." Another group of plaintiffs allegedly received the documentation only in 1991, and sought "a refund of penalty interest and interest between time the offer should have been proposed and tendered (1989-January) and time of offer tender (mid-1991)." The government filed a second motion to dismiss, arguing that the taxpayers failed to state a claim upon which relief could be granted because they did not allege that the IRS discriminated against them intentionally, or that the differing settlement terms were based on impermissible considerations or arbitrary classifications. The district court granted the second motion to dismiss with prejudice. This appeal followed.

STANDARD OF REVIEW

"Dismissal of a complaint under Fed.R.Civ.P. 12(b)(6) is reviewed de novo," and "all allegations of material fact in the complaint are taken as true and are construed in the light most favorable to the nonmoving party." Oscar v. University Students Co-op. Ass'n, 965 F.2d 783, 785 (9th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 655, 121 L.Ed.2d 581 (1992). "[D]ismissal for failure to state a claim is proper 'only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.' " Cervantes v. City of San Diego, 5 F.3d 1273 (9th Cir.1993) (quoting Hishon v. King & Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984)). "Review is limited to the contents of the complaint." Moore v. City of Costa Mesa, 886 F.2d 260, 262 (9th Cir.1989), cert. denied, 496 U.S. 906, 110 S.Ct. 2588, 110 L.Ed.2d 269 (1990).

DISCUSSION

I. JURISDICTION OVER PARTIES NOT NAMED IN THE NOTICE OF APPEAL

The government first claims that Lee and Norma J. Argabright are the only proper parties to this appeal as only the Argabrights are named in the Notice of Appeal. The government contends that this conclusion follows directly from Torres v. Oakland Scavenger Co., 487 U.S. 312, 108 S.Ct. 2405, 101 L.Ed.2d 285 (1988).

In Torres, a notice of appeal from a judgment of dismissal listed the names of 15 out of 16 plaintiffs as parties, but, due to a clerical error, did not list the petitioner. The Supreme Court concluded that because the petitioner "was never named or otherwise designated," while all of the other plaintiffs specifically were named, the notice failed to give "fair notice" that the petitioner also was appealing the judgment. Id. at 317-18, 108 S.Ct. at 2409.

The facts here are comparable. Although the Argabrights are mentioned by name in the caption and in the body of the notice, none of the other plaintiffs below is designated in any manner at any place in the notice. The inclusion of the other plaintiffs is not even implicitly indicated through the use of "et al." or of a generic term such as "plaintiffs." Cf. National Center for Immigrants' Rights, Inc. v. INS, 892 F.2d 814, 816 (9th Cir.1989) (holding that "Torres does not require that the individual names of the appealing parties be listed in instances in which a generic term, such as plaintiffs or defendants, adequately identifies them").

The appellants suggest that this court should distinguish Torres because the district court itself, in its order dismissing the complaint entered February 10, 1993, referred to the action as "Lee and Norma J. Argabright/Plaintiffs v. United States of America/Defendant." The logic that led the Torres Court to its concededly "harsh" result, see id. at 318, 108 S.Ct. at 2409, however, suggests that this is a distinction without a difference. As the government emphasizes, Torres makes clear that the failure to name certain parties when other parties are named is a jurisdictional defect, and, accordingly, it is irrelevant that the district court, which properly had jurisdiction over all parties (both the complaint and amended complaint properly listed all plaintiffs by name), previously had omitted the names in one of its orders. Whatever the district court may have done, the plaintiffs failed to provide "fair notice" that unnamed parties were participating in the appeal.

Because the Notice of Appeal specifically lists certain parties and omits others, and because the Notice contains no generic term which otherwise adequately identifies the unnamed parties, we lack jurisdiction over the unnamed parties. Accordingly, we conclude that jurisdiction is proper only with respect to Lee and Norma J. Argabright.

II. JUDICIAL REVIEW OF IRS DECISIONS UNDER Sec. 6404(e)(1)

The government contends that, because Section 6404(e)(1) of the Internal Revenue Code, 26 U.S.C. Sec. 6404(e)(1) (1983), gives the Commissioner complete discretion to determine whether or not to abate interest in situations in which all or part of the interest owed by the taxpayer is due to delay Section 6404(e)(1) of the Internal Revenue Code provides:

caused by IRS personnel, the appellants' abatement claim is not reviewable. We agree.

(e) Assessments of interest attributable to errors and delays by Internal Revenue Service.--

(1) In General.--In the case of any assessment of interest on--

(A) any deficiency attributable in whole or in part to any error or delay by an officer or employee of the Internal Revenue Service (acting in his official capacity) in performing a ministerial act, or

(B) any payment of any tax described in Section 6212(a) to the extent that any error or delay in such payment is attributable to such officer or employee being erroneous or dilatory in performing a...