Mallard Automotive Group, Ltd. v. U.S., No. CV-N-03-0029DWH(RAM).

Decision Date21 September 2004
Docket NumberNo. CV-N-03-0029DWH(RAM).
PartiesMALLARD AUTOMOTIVE GROUP, LTD., Plaintiff, v. UNITED STATES of America, Defendant.
CourtU.S. Court of Appeals — Third Circuit

Alex Flangas, Patricia Halstead, Hale Lane Peek, Dennison & Howard, Reno, NV, for Plaintiff.

Daniel Bogden, U.S. Attorney's Office, Reno, NV, Jennifer Giaimo, U.S. DOJ — Tax Division, Washington, DC, for Defendant.

ORDER

HAGEN, District Judge.

Before the court is plaintiff's motion to reconsider (# 20) this court's order (# 19) dismissing count I of plaintiff's complaint for lack of subject matter jurisdiction. Defendant has opposed (# 24), and plaintiff has replied (# 25). After review of the record and consideration of the relevant law, this court notes the following in making its disposition:

I. Factual and Procedural Background

In its complaint (# 2), plaintiff asserts four claims for relief: (1) Wrongful Levy pursuant to 26 U.S.C. § 7426; (2) Refund pursuant to 26 U.S.C. § 7422; (3) Breach of Contract pursuant to 28 U.S.C. § 1491; and (4) Breach of the Covenant of Good Faith and Fair Dealing pursuant to 28 U.S.C. § 1491. Plaintiff has conceded that this court does not have jurisdiction with regard to the latter two claims, which fall under the jurisdiction of the Federal Court of Claims pursuant to 28 U.S.C. § 1631.

This dispute arose as a result of an IRS levy in September of 1998 upon an obligation by plaintiff to LeClair Management Corporation ("LeClair) as the nominee of David Smith ("Smith"), the taxpayer. Plaintiff disputed the IRS's determination that LeClair was a nominee of Smith and, therefore, challenged whether the IRS had any right to assert its levy against plaintiff. Plaintiff also disputes the amount of its obligation to LeClair.

Following the imposition of the levy, plaintiff entered into a settlement agreement with the IRS whereby it deposited an undisputed portion, of the obligation to LeClair, of $1 million into an interpleader action. Additionally, plaintiff tendered a $200,000 letter of credit in favor of the IRS. The IRS's right to draw upon the letter of credit is the focal dispute in this litigation.

LeClair and the IRS settled the interpleader action by stipulation. The Order Resolving Interpleader Action divided the one million interpleaded by the plaintiff between LeClair (which received $300,000) and the IRS (which received the balance of over $700,000). Thereafter, the dispute arose concerning the right of the IRS to exercise the $200,000 letter of credit. After the IRS drew upon the entirety of the letter of credit on or about April 30, 2002, plaintiff filed a "Claim for Refund and Request for Abatement" with the IRS on July 15, 2002. The IRS took no action upon the claim and the plaintiff filed its complaint in this court on January 16, 2003.

On June 3, 2003, the United States filed Motion to Dismiss for Lack of Subject Matter Jurisdiction (# 11). The court granted the motion as to Count I of plaintiff's complaint after finding subject matter jurisdiction lacking due to plaintiff's failure to bring the claim within the applicable statute of limitations. (October 27, 2003 Order (# 19).) The motion was denied as to Count II of plaintiff's complaint. (Id.) Plaintiff has now filed a motion to reconsider (# 20) asking this court to set aside the dismissal.

II. Analysis

A. Standard on Motion for Reconsideration

A motion to reconsider an interlocutory order must set forth the following: (1) some valid reason why the court should revisit its prior order; and (2) facts or law of a "strongly convincing nature" in support of reversing the prior decision. Frasure v. U.S., 256 F.Supp.2d 1180, 1183 (D.Nev.2003) (quoting School Dist. No. 1J, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir.1993)). Reconsideration may be appropriate if (1) the court is presented with newly discovered evidence; (2) has committed clear error; or (3) there has been an intervening change in controlling law. Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir.2000). "There may also be other, highly unusual, circumstances warranting reconsideration." School Dist. No. 1J, 5 F.3d at 1263.

B. Application to Plaintiff's Motion (# 20)

In granting the government's motion, the court determined that even if the IRS's exercise of the letter of credit were presumed to support a wrongful levy claim, subject matter jurisdiction would still be lacking because plaintiff did not commence the action within the nine months required by the applicable statute of limitations — 26 U.S.C. § 6532(c)(1). (October 27, 2003 Order (# 19) at 3-4.) Plaintiff has moved for reconsideration of that ruling arguing that (1) the application of the statute of limitations to the wrongful levy claim had not been properly addressed by the parties; (2) that by deciding the issue without allowing plaintiff the opportunity to address and adjudicate it first, the court denied it procedural due process and (3) that the issue cannot be addressed on a 12(b)(1) motion to dismiss because whether a statute of limitations has been equitably tolled is not a jurisdictional question. (See generally Pl.'s Mot. to Reconsider (# 20).)

Federal courts are courts of limited jurisdiction. Accordingly, federal subject matter jurisdiction must exist at the time an action is commenced. See Morongo Band of Mission Indians v. California State Bd. of Equalization, 858 F.2d 1376, 1380 (9th Cir.1988). Because subject matter jurisdiction goes to the power of the court to hear a case, it is a threshold issue and may be raised at any time and by any party. Fed.R.Civ.P. 12(b)(1). Additionally, the court may sua sponte raise the issue of lack of subject matter jurisdiction and must dismiss a case if no subject matter jurisdiction exists. Fed.R.Civ.P. 12(h). Thus, even if the question of subject matter jurisdiction is not fully adjudicated or addressed by the parties, "it is axiomatic that this court has a special obligation to satisfy itself of its own jurisdiction ..." United States v. Touby, 909 F.2d 759, 763 (3d Cir.1990)(internal citations and quotations omitted).

The sole issue on reconsideration, is whether the statute of limitations applicable to plaintiff's wrongful levy claim is jurisdictional in nature. Plaintiff, relying on Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1207 (9th Cir.1995), argues that the statute of limitations contained in 26 U.S.C. § 6532(c)(1) is not jurisdictional, and this court erred in dismissing the claim. Additionally, plaintiff argues that the Ninth Circuit in Supermail held that the doctrine of equitable tolling applies to 26 U.S.C. § 6532(c)(1), thereby allowing the period for bringing a wrongful levy claim against the government under 26 U.S.C. § 7426 to be tolled. 68 F.3d at 1207.

Prior to 1990, the doctrine of equitable tolling had not been applied to suits against the government. In 1990, the Supreme Court decided Irwin v. Department of Veterans Affairs, 498 U.S. 89, 95-96, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990), wherein it was held that once the United States government waives sovereign immunity, the doctrine of equitable tolling may apply to toll the statute of limitations. The Court sought to establish a general rule to apply equitable tolling to suits against the government. Specifically, the Supreme Court held that the "same rebuttable presumption of equitable tolling applicable to suits against private defendants should also apply to suits against the United States." Id. at 95-96, 111 S.Ct. 453. In Irwin, the Court applied the rebuttable presumption rule to Title VII of the Civil Rights Act of 1964 and found the doctrine of equitable tolling to be consistent with the congressional intent behind the Act, and therefore the statute could be tolled. Id. at 96, 111 S.Ct. 453.

After Irwin, courts have not been consistent in the application of equitable tolling to suits against the government. One court has recognized that while it "intended to create uniformity in this area, Irwin has appeared to sow more confusion and disuniformity than existed earlier." State v. Sharafeldin, 382 Md. 129, 854 A.2d 1208, 1216 (2004). The Ninth Circuit's precedent bears this out and appears to be internally conflicted, especially as applied to the statute at question here 26 U.S.C. § 6532. In April 1995, the Ninth Circuit in Maraziti v. Thorpe, 52 F.3d 252, 255 (9th Cir.1995) affirmed the district court's dismissal of a wrongful levy suit because of a lack of subject matter jurisdiction. The district court found it lacked subject matter jurisdiction because Maraziti's claim was filed well beyond the nine-month limitations period set forth in 26 U.S.C. § 6532(c)(1). Additionally, the court found that Maraziti did not file an administrative request for return of property, pursuant to section 6532(c)(2), thus the limitations period was not extended.

Conversely, in August 1995, the Ninth Circuit decided Capital Tracing, Inc. v. United States, 63 F.3d 859 (9th Cir.1995). Therein, a district court had dismissed an untimely wrongful levy action based upon a lack of subject matter jurisdiction. The Court of Appeals reversed holding that the limitations period, 26 U.S.C. § 6532(c), for bringing a wrongful levy action under 26 U.S.C. § 7426 could be equitably tolled. Id. at 863.

In October 1995, another Ninth Circuit panel addressed the application of equitable tolling to wrongful levy suits. Supermail, 68 F.3d at 1204. Therein, the district court had dismissed a wrongful levy action for a lack of subject matter jurisdiction because the suit was untimely under 26 U.S.C. 6532(c)(1). The appellate court found that the district court had "erroneously believed the statute of limitations contained in 26 U.S.C. § 6532(c)(1) to be a jurisdictional prerequisite." Id. at 1206 n. 2. Rather, the appellate court held that "federal statutory time limitations on suits against the government are not...

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