Guest blogger Bob Probasco returns today with perhaps his final update on the Paresky case. Christine
Nothing about the decision was really surprising. The contrary decision in E.W. Scripps Co. v. United States, 420 F.3d 589 (6th Cir. 2005) was always a strained interpretation of the jurisdictional statutes, and the trend has been moving away from that interpretation over the past few years. The Eleventh Circuit evidently thought it was an easy case as well; Carl Smith pointed out to me that the decision came only 35 days after oral argument, compared to 17 months for the Pfizer decision. That’s fast! But I thought I would offer a few comments as we perhaps close this chapter.
What was this dispute all about, again?? There are two provisions that might offer district court jurisdiction for a stand-alone case seeking additional interest from the government on tax overpayments. 28 U.S.C. § 1346(a)(1) covers claims for recovery of taxes, that is, tax refund suits. 28 U.S.C. § 1346(a)(2)—the “little” Tucker Act—covers claims against the government under the Constitution, Acts of Congress, regulations, contracts with the government, or non-tort damages. The little Tucker Act is limited to claims of $10,000 or less, whereas the courts can hear tax refund suits for any amount. Under 28 U.S.C. § 1491(a)(1), however, the Court of Federal Claims can hear Tucker Act claims for any amount.
Court also have, with very rare exceptions, concluded that a tax refund suit—even if that includes stand-along cases for additional overpayment interest—is subject to the 2-year statute of limitations (from the IRS denial of the administrative claim) in section 6532. Tucker Act claims, however, fall under the general 6-year statute of limitations (from the date the cause of action accrued, generally when the overpayment was scheduled): 28 U.S.C. § 2401 for district courts or 28 U.S.C. § 2501 for the CFC.
In these cases—Scripps, Pfizer, Bank of America, and Paresky—the taxpayers were arguing that their cases fit under “refund suit” jurisdiction. And the government was arguing strenuously that their claims only qualified for jurisdiction under the Tucker Act. Thus, when the amount at issue was over $10,000, the CFC would be the only available forum.
If taxpayers can always go the Court of Federal Claims, why is this important to them??
I think it’s primarily a matter of forum-shopping. Pfizer’s case involved an issue—interest payable when a refund check is lost and has to be re-issued—for which there was a favorable Second Circuit precedent: Doolin v. United States, 918 F.2d 15, 18 (2d Cir. 1990). Bank of America’s case, on the other hand, appears to have been filed in Western District of North Carolina to avoid an unfavorable Federal Circuit precedent, specifically, Wells Fargo & Co. v. United States, 827 F.3d 1026 (Fed. Cir. 2016). (I’m guessing here, but it seems very likely from looking at the pleadings that Wells Fargo would have been a huge incentive to avoid the Federal Circuit.)
For Pfizer and Bank of America, the courts’ decision were not fatal. Pfizer could still hope for the same result in the CFC; at least, I’m not aware of any negative precedent there. Bank of America may have lost a significant portion, but not all, of its claim by winding up in the CFC.
The Pareskys, though, were not forum shopping. In fact, they initially filed suit in the Court of Federal Claims. But they faced a statute of limitations problem. By the time they filed suit, the 6-year statute of limitations for Tucker Act claims had expired. So the CFC dismissed their case for lack of jurisdiction but transferred it to the Southern District of Florida at their request. A refund suit, for which the statute of limitations had not yet expired, was their only hope. (The Eleventh Circuit pointed out in a footnote that the Tucker Act statute of limitations had not expired yet when the IRS denied their refund claim, so they still had time to file in the CFC. And, of course, they could have filed suit even while the refund claim was pending. Alas, they did not.)
Does this result make sense from a policy perspective?
Debatable. There are two conflicting policies involved here. On the one hand, Congress wanted most—and all large—Tucker Act claims to go to the CFC, because claims against the federal government are their area of expertise. Thus, the $10,000 limit on Tucker Act claims in district court; provide easier access to local courts, but only for smaller cases where the difficulty and expense of litigating in a far-off forum would be relatively harsher.
On the other hand, Congress wanted taxpayers to be able to bring all federal tax refund suits in their local forum. That may have reflected a judgement that: (a) the relative expertise of the CFC is less of an issue; and (b) there may be a lot more tax refund suits than Tucker Act claims, so it’s better to spread those out. Which of those policies should rule when the suit at issue is for additional interest on federal tax overpayments? Hard to say. There are fewer of these cases than tax refund suits, and it may be beneficial to establish precedents that will apply uniformly to all taxpayers. But the same rationales for district court jurisdiction without a dollar limitation for refund suits might apply to these suits as well. I doubt if Congress collectively gave it much thought. If they had, perhaps they would have been comfortable with district courts hearing these cases, just as Pfizer, Bank of America, and the Pareskys wanted. But we now have three circuit courts that have decided that’s not what Congress enacted.
So, is this really the end of the line for the Pareskys?
They’re really very sympathetic plaintiffs. The dispute arose out of their losing a lot of money in the Bernie Madoff Ponzi scheme and filing refund claims to recoup taxes because of the loss. (Rather ironic that Mr. Madoff passed away between oral arguments and the decision, isn’t it?) This decision is pouring salt on the wound. But, alas, I don’t see much hope at all for them. They might ask for an en banc review or file a cert petition with the Supreme Court. But I think both would likely be rejected. (DOJ Tax Division might like to see this case go to the Supreme Court, to overturn Scripps, but I seriously doubt if they could convince the Solicitor General to support granting cert.) And even if an en banc review by the Eleventh Circuit or cert by the Supreme Court were granted, I would certainly expect them to reach the same decision.
As far as the issue in general, without a Supreme Court decision, we may still see some of these cases crop up occasionally in other circuits. The score is still only 3–1 and if the money involved is enough and precedents dictate that a district court would be a more favorable forum, taxpayers may take a shot at it. But if the issue comes before any of the nine circuits remaining that still haven’t addressed it, I expect they would wind up agreeing with the Second, Eleventh, and Federal Circuits.