Philadelphia Marine Trade Association v. C.I.R.

• Decision Date: 15 April 2008
• Docket Number: No. 06-3798.,06-3798.
• Parties: PHILADELPHIA MARINE TRADE ASSOCIATION-INTERNATIONAL LONGSHOREMEN'S ASSOCIATION PENSION FUND; O'Neill Consulting Corporation, Appellants v. COMMISSIONER OF INTERNAL REVENUE SERVICE; United States Of America.
• Court: U.S. Court of Appeals — Third Circuit

523 F.3d 140

PHILADELPHIA MARINE TRADE ASSOCIATION-INTERNATIONAL LONGSHOREMEN'S ASSOCIATION PENSION FUND; O'Neill Consulting Corporation, Appellants v. COMMISSIONER OF INTERNAL REVENUE SERVICE; United States Of America.

No. 06-3798.

United States Court of Appeals, Third Circuit.

Argued September 26, 2007.

Opinion Filed: April 15, 2008.

Vincent J. Pentima, Esquire (Argued), Jessamyne M. Simon, Esquire, Alfred J. D'Angelo, Jr., Esquire, Joseph P. Sirbak, II, Esquire, Buchanan, Ingersoll & Rooney, Philadelphia, PA, for Appellant.

Eileen J. O'Connor, Assistant Attorney General, Robert W. Metzler, Esquire, Kenneth W. Rosenberg, Esquire, Teresa T. Milton, Esquire, Kenneth L. Greene, Esquire (Argued), United States Department of Justice, Tax Division, Washington, DC, for Appellee.

Before: AMBRO, JORDAN and ROTH, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

In this tax case the Internal Revenue Service imposed a tax penalty and collected it by a levy on assets. The trust fund (against whose assets the IRS levied to collect the penalty) and the fund's administrator (who reimbursed the fund on the penalty it paid) seek the return of the monies paid. The IRS resists on two grounds that are pertinent to this appeal. It argues that the fund's administrator lacks standing to sue the United States for a refund under 28 U.S.C. § 1346(a)(1), where the penalty was actually assessed against the fund itself but the administrator reimbursed the fund. We conclude that the IRS is correct on this issue, and the administrator lacks standing.

But that does not end the matter. The taxpayer (the fund) may still sue. The IRS claims, however, the tax refund request was untimely. The fund counters that it produced evidence that it mailed the request early enough to allow timely physical delivery. This method, known as the common-law mailbox rule, works if the rule still exists. The Government argues it does not because 26 U.S.C. § 7502 preempts the common-law mailbox rule in tax cases. We disagree; the mailbox rule simply supplements § 7502. In addition, even before any consideration of the mailbox rule, there is sufficient direct evidence of timely receipt to preclude summary judgment against the fund. Thus, we vacate the District Court's order to the extent it concluded the contrary.

I. Facts and Procedural History

The Philadelphia Marine Trade Association/International Longshoremen's Association Vacation Fund (the "Fund") is a multi-employer trust fund that accumulates contributions from collective bargaining agreements between the Philadelphia Marine Trade Association and local unions of the International Longshoremen's Association. The Fund is required to withhold income and payroll taxes from the money it distributes and to remit these taxes to the IRS. Accordingly, it hired O'Neill Consulting Corporation ("O'Neill"), a family-owned consulting business, as the Fund's administrator to handle the task of calculating and remitting the taxes.

Prior to June 25, 2001, the IRS determined that the Fund had remitted its taxes for the fourth quarter of 1999 and the second quarter of 2000 by a paper coupon, rather than electronically, in violation of applicable regulations. It also apparently determined that the Fund had remitted its taxes for the fourth quarter of 2000 late, though it did so electronically. The IRS thus assessed penalties against the Fund and notified O'Neill of the problems. The O'Neill employee who received the communications from the IRS, however, failed to take corrective action. Accordingly, on June 25, 2001, the IRS levied on $160,386.48 held by the Fund in a money market account. The O'Neill employee who had failed to respond to the IRS then resigned in February 2003 without having disclosed the existence of the levy to O'Neill or the Fund. It was not until the spring of 2003 that the Fund and O'Neill discovered the levy as a result of an audit on the Fund's books performed by Anthony Pontarelli, CPA.

Alarmed, Pontarelli and Susan O'Neill¹ (O'Neill's president) called Revenue Officer James Dugan of the IRS to ask for an explanation of the levy. Dugan testified that because the tax penalty was paid, and the case therefore closed from the IRS's standpoint, he did not keep records of this communication. He also testified, however, that during this conversation Pontarelli and Ms. O'Neill were "frantic," "in an uproar," and "so nervous and concerned." Subsequently, the Fund and O'Neill assert, Pontarelli drafted a letter to Dugan on or before May 8, 2003 requesting a refund (the "May 8 Letter"). Pontarelli testified that he faxed the May 8 Letter to Ms. O'Neill, and she testified that she received it, immediately signed it, and sent it via United States Postal Service overnight mail to Dugan. Ms. O'Neill cannot provide proof of mailing the May 8 Letter, and there is no separate billing record to support this assertion because the postage was paid through a meter at O'Neill's office. Dugan claimed he could not recall whether he received the letter.

Ms. O'Neill contends that, having not yet heard a response from Dugan to the May 8 Letter, she called him in late May. She asserts that Dugan informed her that he had not yet had a chance to review the matter but would let her know when he had done so. Ms. O'Neill alleges that she then sent another letter to Dugan on June 13, 2003 (the "June 13 Letter"), with postage again prepaid through a meter in O'Neill's office, this time by first class mail. Although Dugan again does not recall receiving the letter, a computer printout shows that the June 13 Letter was in fact composed by Ms. O'Neill on that date.

Pontarelli testified that Dugan subsequently left him two voicemail messages in late June 2003. The first assured him that Dugan would process a refund for the Fund. The second backed off from this assurance, noting that the matter was more complicated than Dugan had anticipated.

In August 2003, following various communications over the summer, Pontarelli, Thomas McGoldrick (O'Neill's attorney) Dugan, and Allison Sigler (a "trouble shooter" for the IRS) met to discuss the matter. Dugan and Sigler declined to refund the money at this meeting, but told Pontarelli and McGoldrick how they could formally request a refund. Accordingly, in September 2003 McGoldrick, on behalf of the Fund, filed a formal refund request via IRS Form 843 and a nine-page letter. The IRS then granted a partial refund of $93,365.61, corresponding to the second and fourth quarters of 2000,² but withheld the portion corresponding to the fourth quarter of 1999. According to the IRS, because the penalty for this quarter was paid on June 25, 2001, under 26 U.S.C. § 6511(a) the Fund had to request a refund by June 25, 2003. The September 2003 refund request, the IRS asserted, was therefore untimely.

Recognizing that its employee was partly to blame for the Fund's predicament (having failed timely to respond to the IRS's pre-levy communications), O'Neill reimbursed the Fund for the tax penalty. It did so via a formal agreement in which the Fund, in exchange for reimbursement, promised to cooperate with O'Neill in processing its appeal to the IRS for a refund and to transfer to O'Neill any money recovered from the IRS.

The Fund and O'Neill filed suit in the United States District Court for the Eastern District of Pennsylvania to recover payment of the remaining penalty. They, as well as the Government, later moved for summary judgment. In support of its motion, the Government argued that the District Court lacked jurisdiction over O'Neill's claim, as O'Neill lacked standing under 28 U.S.C. § 1346(a)(1). The Government also argued that the Court lacked jurisdiction over both plaintiffs' claims due to untimely filing of the refund request, because the plaintiffs did not produce direct evidence of timely receipt by the IRS and could not avail themselves of the common-law mailbox rule, which the Government contended was preempted by 26 U.S.C. § 7502. The District Court agreed and granted summary judgment in the Government's favor (thus denying the summary judgment motion of the Fund and O'Neill). The Fund and O'Neill timely appealed, and we exercise appellate review pursuant to 28 U.S.C. § 1291.

II. Standard of Review

Because the District Court granted summary judgment, our review is plenary. See, e.g., Bailey v. United Airlines, 279 F.3d 194, 198 (3d Cir.2002). Summary judgment is proper where "there is no genuine issue as to any material fact and . . . the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). We must draw all reasonable inferences from the underlying facts in the light most favorable to the nonmoving party. Bailey, 279 F.3d at 198.

III. O'Neill's Standing

The District Court properly concluded that O'Neill lacks standing to sue the Government for a refund. First, 28 U.S.C. § 1346(a)(1) has conferred no right on O'Neill to sue for a refund; it has conferred that right only on the taxpayer— the Fund. Second, O'Neill does not qualify for third-party standing to assert the Fund's right.

A. O'Neill's Lack of Statutory Standing Under 28 U.S.C. § 1346(a)(1)

Statutory standing asks "whether Congress has accorded this injured plaintiff the right to sue the defendant to redress his injury." Graden v. Conexant Sys., Inc., 496 F.3d 291, 295 (3d Cir.2007) (emphasis in original). The statute at issue here is 28 U.S.C. § 1346(a)(1), by which the United States has waived sovereign immunity. It confers original jurisdiction on the district courts for civil actions against the United States for the recovery of allegedly erroneous or illegal tax assessments or collections. See United States v. Dalm, 494 U.S. 596, 601-02, 110 S.Ct. 1361, 108 L.Ed.2d 548 (1990).³

The Supreme Court in United States v. Williams has cautioned that we must not enlarge this waiver beyond the purview of the statutory language, and that we must construe ambiguities in favor of immunity....