Volpicelli v. U.S.: 9th Circuit Holds Time to File a Wrongful Levy Suit Is Subject to Equitable Tolling

In 1995, the Ninth Circiut had decided this very question the same way in two opinions, Supermail Cargo, Inc. v. U.S., 68 F.3d 1204, 1206-07 (9th Cir. 1995), and Capital Tracing, Inc. v. U.S. 63 F.3d 859, 861-62 (9th Cir. 1995).  Both of those opinions looked to the then-recent Supreme Court opinion in Irwin v. Dept. of Veterans Affairs, 498 U.S. 89 (1990), which held that the same rebuttable presumption in suits among private litigants that statutes of limitations could be subject to equitable tolling applied in analogous suits involving the United States.  The Ninth Circuit made two separate holdings:  First, section 6532(c) is not “jurisdictional”.  Jurisdictional time periods can never be tolled.  Second, that, section 6532(c) was a common statute of limitation, and there was nothing to rebut the Irwin presumption in favor of tolling.

Also in 1995, the Ninth Circuit applied Irwin to hold that the 2-year and 3-year periods to file administrative tax refund claims with the IRS under section 6511(a) were subject to equitable tolling.  The Solicitor General could have sought cert. on the equitable tolling issue as to both Code sections, but chose to seek cert. only on the section 6511(a) time period.  And, in 1997, the Supreme Court reversed the Ninth Circuit.

In an opinion that did not mention the word “jurisdiction”, the Supreme Court assumed, without deciding, that the Irwin presumption might apply to the section 6511(a) non-court filing period and held that the presumption would be overcome for this time period.  U.S. v. Brockamp, 519 U.S. 347 (1997).  In Brockamp, the Court supported its holding by pointing to the structure of the statute (with existing multiple detailed exceptions and an unusual look-back amount period at subsection (b)) and the administrative problems that might ensue if tens of millions of late-file refund claims had to be analyzed for equitable facts justifying tolling.  These things, the Court said, indicated that Congress did not want the courts to add another, judicial exception.  (Parenthetically, in 1998, Congress amended section 6511 to add a new subsection (h) to partially overrule Brockamp in cases where a taxpayer was “financial disabled”.)

In passing in Brockamp, the Supreme Court also wrote that, “[t]ax law, after all, is not normally characterized by case-specific exceptions reflecting individualized equities.” Id., at 352.  While this statement (I think intended as rather smug humor) is fairly true at to the calculation of tax, it is demonstrably false (as the Court should have known) in the area of tax collection, where, among other things, the Court had already held that refund and tax collection suits are subject to the doctrine of equitable recoupment and foreclosure suits under section 7403 are informed by equitable considerations.  I could list about a dozen more equitable statutes or case holdings to make my point about equity in tax collection, and my point has gotten only stronger by Congress adding more equitable determinations in recent years (e.g., equitable innocent spouse relief under section 6015(f)).  In any event, grabbing at this single sentence, the government, since 1997, has always argued that any other time period in the Internal Revenue Code is not subject to equitable tolling by taxpayers or others.

Up to today, no Circuit court had held, post-Brockamp, that any time period in the Code was subject to equitable tolling.  Indeed, shortly after Brockamp was decided, the Third Circuit — citing the opinion, including the sentence about “individualized equities” — held that the section 6532(c) wrongful levy time period was not subject to equitable tolling.  Becton Dickinson & Co. v. Wolckenhauer, 215 F.3d 340, 351-52 (3d Cir. 2000) (collection pre-Brockamp opinions from district courts and Circuits other than the Ninth that all hold that section 6532(c)’s time period may not be equitably tolled).

I have written before about developments in non-tax Supreme Court case law in recent years both cutting back on the use of the term “jurisdictional” and finding many more periods tollable under the presumption in  Irwin.  See, e.g., “Cracks Appear in the Code’s ‘Jurisdictional’ Time Provisions”, 2012 TNT 210-4 (10/30/12).  I have argued that it is time for courts to apply this case law to the tax world.  Recently, the Tax Court did so in Lippolis v. Commissioner, 143 T.C. No. 20 (11/12/14), on which I have also blogged .  In Lippolis, the Tax Court recently held, citing this recent non-tax Supreme Court case law, that the $2 million threshold for whistleblower awards is not jurisdictional.  In Volpicelli, the Ninth Circuit becomes the first Circuit court dealing with a tax time period to cite this recent non-tax Supreme Court case law for holding that a time period is both not jurisdictional and is subject to equitable tolling.  I hope other courts will follow as to other Code time periods — including the 2-year post-disallowance time period in which to file a tax refund suit at section 6532(a).

In addition to its being compelled to follow its prior precedent, the Volpicelli court addressed both Brockamp and several recent Supreme Court opinions that the government cited as intervening authority requiring the panel to deviate from the Ninth Circuit’s prior case law.  As to Brockamp, the Court stated, in part,

[The s]ection 6532(c) . . .  limitations period is set forth in emphatic language — “no suit or proceeding . . . shall be begun after the expiration of 9 months from the date of the levy” — but that language does not strike us as “unusually” emphatic. It seems no more emphatic than the language of the Antiterrorism and Effective Death Penalty Act’s limitations period, 28 U.S.C. § 2244(d), which provides that “[a] 1-year period of limitation shall apply to an application for a writ of habeas corpus” — language that the Court has said “reads like an ordinary, run-of-the-mill statute of limitations.” Holland v. Florida, 560 U.S. 631, 647 (2010). Nor is the language of § 6532(c) highly detailed or technical; in fact, it’s just the opposite. See note 2 above. The limitations period it establishes is purely procedural and has no substantive impact on the amount of recovery. And § 6532(c) does not contain numerous exceptions, as does § 6511. It has just one

exception (if it can even be called that), which extends the limitations period if the plaintiff seeks administrative review before filing suit. 26 U.S.C. § 6532(c)(2). Given the stark differences between § 6511 and § 6532(c), we are not persuaded that Brockamp has effectively overruled Supermail Cargo and Capital Tracing.

The government urges us to place overriding weight on one similarity that § 6511 and § 6532(c) do share: Both are found in the tax code. The government contends this shared feature is significant because the Brockamp Court observed, in the course of explaining why Congress did not intend to allow equitable exceptions to § 6511’s filing deadline, that “[t]ax law, after all, is not normally characterized by case specific exceptions reflecting individualized equities.” 519 U.S. at 352. The Court may in time decide that Congress did not intend equitable tolling to be available with respect to any tax-related statute of limitations. But that’s not what the Court held in Brockamp. It instead engaged in a statute specific analysis of the factors that indicated Congress did not want equitable tolling to be available under § 6511. The Court later made clear in Holland that the “‘underlying subject matter’” of § 6511 — tax law — was only one of those factors. 560 U.S. at 646 (quoting Brockamp, 519 U.S. at 352). As we have explained, the other factors on which the Court relied are not a close enough fit with § 6532(c) to render Brockamp controlling here. [Slip op. at 9-10.]

The court also held that, with respect to wrongful levy suits, the analogous private suits for purposes of the Irwin presumption were the traditional common law torts of conversion and trespass to chattels.

With regard to whether section 6532(c) was “jurisdictional”, the court noted that the time period at section 6532(c) was located in a different section from the jurisdictional grant to district courts for wrongful levy suits at 28 U.S.C. sec. 1346(e) — a factor recent Supreme Court cases say indicates that Congress did not intend a claims processing rule to be jurisdictional.  The court also wrote:

The Supreme Court’s recent cases require a clear statement from Congress before a procedural rule will be treated as jurisdictional. [Sebelius v.] Auburn [Regional Med. Centr.], 133 S. Ct. at 824 [(2013)]; Henderson ex rel. Henderson v. Shinseki, 131 S. Ct. 1197, 1203 (2011). We find no such clear statement here. Section 6532(c) does not cast its filing deadline in “jurisdictional” terms any more than the statute at issue in Henderson did—a statute the Court held to be nonjurisdictional. See Henderson, 131 S. Ct. at 1204–05. [Slip op. at 6.]

At the oral argument, it appeared that, though the Ninth Circuit judges were leaning toward ruling for Mr. Volpicelli, they might want to await the Supreme Court’s pending rulings in two cases involving possible equitable tolling of two different Federal Tort Claims Act time periods, U.S. v. Wong and U.S. v. June.  I have blogged on those cases before and explained how they might affect the tax world, as well.  But, the oral argument of those cases that occurred on December 10 was such that it is clear that any ruling for the government in those cases will be predicated on a stare decisis ground that has nothing to do with any Tax Code time period.  No doubt, the Ninth Circuit judges listened to or read the Wong and June oral argument before the Supreme Court and came to the same conclusion, so decided not to wait to issue the opinion.

This case was briefed and argued by Brian Goldman of Orrick’s San Francisco office.  Brian is a recent Ninth Circuit clerk and clerked for Justice Sotomayor during the October 2012 Term.  He is on the Ninth Circuit’s Pro Bono Panel and was assigned to the case when the Court was unhappy with the then-pro se plaintiff’s partly handwritten briefs.  This was too important a case to be decided without proper appellant briefing (notwithstanding my amicus brief) and oral argument. Note my recent post on whether the Tax Court should consider setting up a pro bono panel of its own.  This case is a poster child for such panels.

The big question now is whether the government will be so unhappy that it seeks cert. in Volpicelli (perhaps diverting first to an en banc rehearing request addressed to the entire Ninth Circuit).  My hunch is that the government will eventually ask for cert.  But, my hunch is also that the Supreme Court will uphold the Ninth Circuit on equitable tolling this time around.  If it does so, we will be in a situation where equitable tolling of every IRC time period will be subject to individual analysis — with presumptions in favor of time periods not being jurisdictional and being subject to tolling.  There will be no blanket rules about tolling in the Tax Code either way.