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Hassen v. Government of Virgin Islands

United States Court of Appeals, Third Circuit

June 26, 2017

*SAID HASSEN; KAREN HASSEN, Appellants
v.
GOVERNMENT OF THE VIRGIN ISLANDS; VIRGIN ISLANDS BUREAU OF INTERNAL REVENUE *Amended Per Clerk's Order of

          Argued May 2, 2017

         Appeal from the District Court of the Virgin Islands (D.C. No. 3-15-cv-00038) District Judge: Hon. Curtis V. Gómez

          Alexander Golubitsky, Esq. [ARGUED] Marjorie Rawls Roberts, P.C. Counsel for Appellants

          Claude Earl Walker, Esq. Pamela R. Tepper, Esq. Su-Layne U. Walker, Esq. [ARGUED] Office of Attorney General of Virgin Islands Department of Justice Counsel for Appellees

          Before: GREENAWAY, JR., SHWARTZ, and FUENTES, Circuit Judges.

          OPINION

          SHWARTZ, Circuit Judge.

         Said and Karen Hassen ("the Hassens") appeal the District Court's order dismissing their claim against the Government of the United States Virgin Islands ("USVI") and the Bureau of Internal Revenue ("BIR") for imposing allegedly wrongful levies on their property in violation of 26 U.S.C. § 7433(a). To bring a claim under § 7433(a), a taxpayer must exhaust the administrative remedies set forth in § 7433(d). While such exhaustion is not a jurisdictional requirement, it is mandatory. Here, we need not decide whether the Hassens fulfilled this requirement because their complaint fails to plead a violation of § 7433(a). Thus, we will affirm the District Court's order dismissing their complaint.

         I

         The BIR sent the Hassens a final notice of intent to levy their property to satisfy an outstanding tax debt of $5, 778.32 for the 2004 tax year. Subsequently, on March 8, 2013, the BIR issued a levy against the Hassens' property at First Bank Virgin Islands ("Levy 1").

         On June 11, 2013[1] and December 26, 2013[2], the Hassens submitted letters requesting an installment agreement to satisfy their 2004 tax debt.[3] The December 2013 letter reflects that the Hassens and the BIR engaged in discussions concerning their request and outstanding tax liability, and that the BIR directed the Hassens to submit an IRS Form 9465 to request an installment agreement. The Hassens failed to do so but nevertheless allege that the BIR has never accepted or rejected their proposed installment agreement. Thereafter, the BIR issued four additional levies against the Hassens' accounts.

         Rather than file an administrative claim as required by 26 U.S.C. § 7433(d) and 26 C.F.R. § 301.7433-1, the Hassens filed a complaint against the USVI and BIR for imposing allegedly wrongful levies on their property in violation of 26 U.S.C. § 7433(a) on the theory that the additional levies violated 26 U.S.C. § 6331(k)(2), which prohibits the issuance of any levy while a proposed installment agreement is pending.

         The USVI and BIR moved to dismiss the Hassens' complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6). With respect to their motion under Rule 12(b)(1), the USVI and BIR argued that the District Court lacked subject matter jurisdiction because the Hassens failed to exhaust their administrative remedies. The USVI and BIR also sought dismissal under Rule 12(b)(6), arguing that the complaint fails to state a claim upon which relief can be granted. The District Court determined that exhaustion was not a jurisdictional prerequisite and that dismissal under Rule 12(b)(1) was therefore not warranted, but found that the Hassens did not exhaust their administrative remedies, which is a condition to obtain relief, and, as a result, dismissed their complaint pursuant to Rule 12(b)(6). The Hassens appeal.

         II[4]

         A

         Because we must ensure that the District Court and our Court have jurisdiction over a case before addressing the merits, see Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998), we first review the District Court's conclusion that exhaustion of administrative remedies is not a jurisdictional prerequisite to bringing a claim under 26 U.S.C. § 7433. Section 7433(a) allows a taxpayer to "bring a civil action for damages" where an "officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of" Title 26 or its regulations. 26 U.S.C. § 7433(a). Section 7433(d)(1) provides that a "judgment for damages shall not be awarded . . . unless the court determines that plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service."

         More than two decades ago, in Venen v. United States, 38 F.3d 100, 103 (3d Cir. 1994), we characterized this exhaustion requirement as jurisdictional. Since then, as one court put it, the United States Supreme Court has cautioned against confusing "mandatory requirements of a cause of action" with a jurisdictional prerequisite "over that cause of action." Hoogerheide v. IRS, 637 F.3d 634, 636 (6th Cir. 2011) (citing Arbaugh v. Y&H Corp., 546 U.S. 500, 516 (2006)). To avoid this confusion, the Court established the ...


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