Shapiro v. Secretary of State, 73-2260.

• Decision Date: 15 May 1974
• Docket Number: No. 73-2260.,73-2260.
• Citation: 499 F.2d 527
• Parties: Samuel SHAPIRO and Bella Shapiro, Appellants, v. SECRETARY OF STATE et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

499 F.2d 527 (1974)

Samuel SHAPIRO and Bella Shapiro, Appellants, v. SECRETARY OF STATE et al.

No. 73-2260.

United States Court of Appeals, District of Columbia Circuit.

Argued March 1, 1974.

Decided May 15, 1974.

Rehearing Denied July 17, 1974.

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Nathan Lewin, Washington, D. C., with whom Herbert J. Miller, Jr. and Martin D. Minsker, Washington, D. C., were on the brief, for appellants.

Robert S. Watkins, Atty., Dept. of Justice, with whom Scott P. Crampton, Asst. Atty. Gen., Earl J. Silbert, U. S. Atty. and Robert S. Rankin, Asst. U. S. Atty. were on the brief, for appellees. Arnold T. Aikens, Asst. U. S. Atty. also entered an appearance for appellees.

Before FAHY, Senior Circuit Judge, and LEVENTHAL and ROBINSON, Circuit Judges.

PER CURIAM:

Appellant Samuel Shapiro, a citizen of Israel, sought to enjoin his extradition by the United States, or, in the alternative, to enjoin a jeopardy assessment made against him by the Commissioner of Internal Revenue. Holding that it lacked jurisdiction, the District Court denied a motion for preliminary injunction and dismissed the complaint. Because we believe that the District Judge acted prematurely in dismissing the complaint against the Commissioner insofar as appellant sought to enjoin the jeopardy assessment, we remand the case for further proceedings in that regard.

I. BACKGROUND

Sometime after coming to this country during 1970, appellant was indicted in Israel for securities fraud. The Israeli government sought his extradition, and appellant litigated the extradition request in the Southern District of New York. The District Court there found him extraditable¹ and the Second Circuit affirmed.² Thereafter, appellant petitioned the Supreme Court for a writ of certiorari and also began negotiations with the Israeli government, in which the Department of State acted as intermediary. Appellant offered to forego further litigation, to withdraw his petition for certiorari, and to submit voluntarily to extradition; in return, he asked: (1) to remain in the United States until the birth of his child, expected in the fall of 1973; (2) to receive a speedy trial in Israel; and (3) to be free on bond before and during trial. After a dispute over the bail question Israel agreed to appellant's requests, and appellant withdrew his petition for certiorari.

Appellant's wife gave birth to a daughter on November 15, 1973, and appellant so notified the Department of State. The Secretary of State then signed a warrant of extradition and appellant agreed to surrender to the United States Marshal in New York on December 9, 1973, for immediate extradition. Appellant also arranged to transfer to the New York branch of the Bank Leumi of Israel certain funds then on deposit in several New York banks. These funds were to be used as bond for appellant's freedom in Israel under his arrangement with the Israeli government. On December 6, 1973, however, one business day before appellant's extradition, the Internal Revenue Service (IRS) imposed a jeopardy assessment on appellant, and served "Notices of Levy" on the New York banks in which appellant maintained accounts or safe deposit boxes. Appellant claims these levies distrained the money which he planned to use as bond in Israel.

Following the IRS's actions, appellant received from Israel a one-week postponement of his extradition. During this week, he brought suit in the District Court for preliminary and permanent injunction against either extradition or the action of the IRS. In response, the Government moved to dismiss the complaint for failure to state a cause of action, and for lack of subject matter jurisdiction. Initially the District Court issued a temporary restraining order against the extradition, but did not restrain the levies on appellant's funds. After filing his complaint, appellant served interrogatories on the IRS, seeking information about the nature of the tax claim against him and the investigation underlying the claim. The IRS reluctantly responded to several of appellant's interrogatories,³ but resisted others as irrelevant or premature.⁴ In particular the IRS asserted that it could withhold all information about the nature of its claim against appellant for sixty days, i. e., until required to serve a notice of deficiency. The IRS further contended that the District Court lacked jurisdiction to investigate the claim underlying the jeopardy assessment, or, indeed, any aspect of the asserted tax liability. The IRS answered the interrogatories on December 19, 1973, and on December 20, 1973, the District Judge announced that he would render a decision at 3:00 p. m. the following day, December 21, 1973. On December 21, 1973, at 12:20 p. m., appellant's attorney received a supplement to the answers previously given by the IRS to the interrogatories. This supplement, containing the formal notice of deficiency that the IRS had previously withheld, revealed for the first time the basis of the assessment against appellant. The Commissioner asserted that appellant owed taxes for income derived from "activities as a dealer in narcotics. . . ."⁵ Thereafter, at 3:00 p. m., the District Judge convened the previously announced hearing, stated from the bench that he lacked jurisdiction of the subject matter, and, accordingly, denied the motion for preliminary injunction and dismissed the complaint. Appellant appeals this decision.

II. THE EXTRADITION

Although appellant sought to enjoin the IRS in the District Court, he asked, in the alternative, that the court enjoin his extradition. Because the Second Circuit has determined that appellant is extraditable, and because the Secretary of State has signed a valid warrant of extradition, the District Court properly concluded that it lacked jurisdiction to enjoin appellant's extradition. Subject to judicial determination of the applicability of the existing treaty obligation of the United States to the facts of a given case, extradition is ordinarily a matter within the exclusive purview of the Executive.⁶ Accordingly, we affirm the trial judge's conclusion that the extradition should not be enjoined.⁷

III. THE JEOPARDY ASSESSMENT

As to appellant's complaint to enjoin the jeopardy assessment made by the IRS, it appears that the dismissal of the action was premature. The District Court has limited jurisdiction to entertain a suit for injunction against the Commissioner, to whom we refer interchangeably with the IRS, and it is understandable, in the circumstances in which the problem was presented for decision, that the District Judge decided that Shapiro had not met the strict tests for that jurisdiction. On reflection, however, we think that Shapiro should have been indulged a greater opportunity to do so.

A. Statutory and Judicial Background.

Ordinarily, the Commissioner cannot attempt to collect an asserted tax deficiency until he has mailed a notice of deficiency to the taxpayer and the period during which the taxpayer may file suit in the Tax Court has expired.⁸ And if the taxpayer files suit, the collection is further enjoined until the final decision of the Tax Court.⁹ The single exception to this procedure comes when the Commissioner "believes that the assessment or collection of a deficiency . . . will be jeopardized by delay . . .;" in that event "he shall . . . immediately assess such deficiency . . ., and notice and demand shall be made by the Commissioner for the payment thereof."¹⁰ This is the jeopardy assessment procedure that the Commissioner used against Shapiro. Once the Commissioner has made a jeopardy assessment, he must notify the taxpayer and demand payment of the asserted deficiency. If the taxpayer neglects or refuses to pay within ten days after notice and demand, the Commissioner may collect the tax by seizing property of the taxpayer.¹¹ Moreover, "if the Secretary of the Treasury or his delegate makes a finding that the collection of such tax is in jeopardy, notice and demand for immediate payment of such tax may be made by the Secretary or his delegate and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the 10-day period provided in this section."¹²

A taxpayer against whom a jeopardy assessment is made must generally pay the asserted deficiency prior to litigation, and cannot obtain an injunction against the Commissioner from a district court.¹³ There is, however, a single limited exception to this general rule. In Enochs v. Williams Packing & Navigation Co.,¹⁴ the Supreme Court held that if equitable jurisdiction would otherwise exist—due to extraordinary circumstances causing irreparable harm to the taxpayer, for which the taxpayer has no adequate remedy at law—and if the taxpayer can show, on the basis of the facts available at the time of trial, that the Commissioner could not ultimately establish his claim, then a district court may issue an appropriate injunction.¹⁵ This exception is quite narrow:

Only if it is . . . apparent at the time of trial that, under the most liberal view of the law and the facts, the United States cannot establish its claim, may the suit for an injunction be maintained. Otherwise the District Court is without jurisdiction, and the complaint must be dismissed.¹⁶

The rationale of this judicially-created exception to the anti-injunctive provision of the Internal Revenue Code is that district courts should be able to enjoin an asserted deficiency which is in fact an "exaction in the guise of a tax,"¹⁷ if the exaction will cause the taxpayer irreparable harm.

When an asserted deficiency is an exaction rather than a tax, there can be no valid collection purpose which is stymied by the court's intervention.¹⁸ Accordingly, the Commissioner can assert no interest that outweighs the taxpayer's interest in avoiding irreparable harm.¹⁹

B. Application of the Enochs exception to the present case.

The principal focus of Shapiro's complaint...