Labonte, Jeffrey N. v. United States

In the

United States Court of Appeals

For the Seventh Circuit

No. 00-2156

Jeffrey N. LaBonte,

Plaintiff-Appellant,

v.

United States of America,

Defendant-Appellee.

Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 99 C 1129--Thomas J. Curran, Judge.

Argued October 24, 2000--Decided December 7,

2000

Before Flaum, Chief Judge, and Manion and

Evans, Circuit Judges.

Manion, Circuit Judge. The Internal

Revenue Service levied property owned by

the plaintiff, Jeffrey LaBonte. Twenty

months later, LaBonte filed a wrongful

levy action against the IRS pursuant to

26 U.S.C. sec. 7426(a)(1). The IRS moved

to dismiss LaBonte’s complaint for lack

of subject matter jurisdiction because

LaBonte did not file suit within the

nine-month period required for wrongful

levy actions under 26 U.S.C. sec.

6532(c)(1) and thus the government’s

sovereign immunity had not been waived.

The district court granted the IRS’

motion to dismiss, and LaBonte appeals.

We affirm.

I. Facts

In 1991, Jeffrey LaBonte entered into a

contract to purchase from his mother,

Bernice LaBonte, a one-fifth interest in

land she owned in East Troy, Wisconsin.

In 1996, the IRS assessed LaBonte’s

mother and father for income tax

deficiencies of $1,388,844 for the

taxable years ending in 1981 and 1983.

The IRS took no action against Jeffrey

LaBonte and there is no suggestion that

he had any responsibility for his

parents’ tax deficiency. On October 18,

1996, the IRS filed a Notice of Federal

Tax Lien against LaBonte’s parents

stating that the United States had a lien

on all of their property.

LaBonte, assisting his parents,

contacted the IRS to discuss how to

obtain a discharge of the lien so that

the Wisconsin property could be sold. IRS

Agent Dale Veer instructed him how to do

so, and on August 20, 1997, LaBonte’s

parents executed an Application for

Discharge. Two days later, LaBonte and

his mother sold their interests in the

Wisconsin property for a total price of

$1,275,000.The IRS received $800,000 from

the net proceeds in payment towards the

Federal Tax Lien. Because of his one-

fifth interest in the property, LaBonte

laid claim to 20% of the proceeds of the

sale. The IRS disputed his claim. Thus

the remaining proceeds, $124,878, were

placed in escrow with All American Land

Services, Inc. pending a determination as

to LaBonte’s entitlement thereto. The IRS

then executed a Certificate of Discharge

of Property from Federal Tax Lien

acknowledging receipt of the $800,000 and

discharging the Wisconsin property from

the lien, reserving the lien against all

other property to which the lien had

attached.

On January 20, 1998, the IRS served a

Notice of Levy on All American for the

remaining sale proceeds. On October 2,

1998, LaBonte’s attorney sent a letter to

the IRS, which was addressed to:

VIS [sic] FACSIMILE AND U.S. MAIL

FAX NO. 297-1190

Revenue Officer Dale R. Veer

Special Procedures/Advisory

310 W. Wisconsin Avenue

Milwaukee, WI 53201-2221

The letter also set forth LaBonte’s name

and address, a description of the balance

of the sales proceeds located in escrow,

a description of LaBonte’s claim to a

priority interest in the proceeds and a

request for the "issuance by the District

Director of a Certificate of Discharge

under Sec. 6325 of $100,000 of the

Escrowed Proceeds and the Director’s

authorization for All American Land

Services, Inc. to release such amount to

[LaBonte]."

Negotiations continued between the IRS,

represented by Agent Veer and District

Counsel James Klein, and LaBonte and his

attorneys until September 22, 1999 when

the negotiations failed and LaBonte filed

the present wrongful levy action under

Section 7426(a)(1).

II. Analysis

The United States government may be sued

only where Congress has waived its

sovereign immunity and the existence of

such waiver is a "prerequisite for

jurisdiction." Kuznitsky v. United

States, 17 F.3d 1029, 1031 (7th Cir.

1994) (quoting United States v. Mitchell,

463 U.S. 206, 212 (1983)). The government

may attach conditions to its waiver and

when "waiver legislation contains a

statute of limitations, the limitations

provision constitutes a condition on the

waiver of sovereign immunity." Block v.

North Dakota, 461 U.S. 273, 287 (1983).

When Congress attaches such conditions,

they "must be strictly observed, and

exceptions thereto are not to be lightly

implied." Id. Cf. Bartley v. United

States, 123 F.3d 466, 467-68 (7th Cir.

1997) (unless taxpayer files proper claim

with the IRS, a court lacks subject

matter jurisdiction over a suit for

refund).

Congress has provided for a waiver of

sovereign immunity in cases where a

claimant seeks the return of property

seized to satisfy the tax liability of

another. 26 U.S.C. sec. 7426(a)(1). One

of the conditions Congress specified in

waiving its immunity is that the claimant

must file his wrongful levy action within

nine months from the date of levy. 26

U.S.C. sec. 6532(c)(1). However, Congress

also included an exception to this nine-

month period: if the claimant properly

files a written request for the return of

levied property with the IRS, then the

period for filing is extended to the

shorter of twelve months from the date of

filing the administrative request or six

months from the date the IRS mails a

notice of disallowance. 26 U.S.C. sec.

6532(c)(2).

There is no dispute that LaBonte did not

file suit within nine months of the date

of levy, as the property was levied on

January 20, 1998 and he did not file suit

until September 22, 1999. However, he

claims that he is entitled to the time

extension authorized by Section

6532(c)(2), arguing that his October 2,

1998 letter mailed to the IRS constituted

a proper request for return of property.

The district court did not agree with

LaBonte’s argument. Accordingly, since

the conditions for waiver of sovereign

immunity had not been fulfilled, the

district court concluded that it lacked

subject matter jurisdiction over the

case. We review the district court’s

dismissal of a complaint for lack of

subject matter jurisdiction de novo. Maas

v. United States, 94 F.3d 291, 294 (7th

Cir. 1996).

In order to qualify for the exception

under Section 6532(c) (2), the claimant

must satisfy the specific requirements

for a proper written request as set forth

by 26 C.F.R. sec. 301.6343-2. The request

must be "addressed to the district

director (marked for the attention of the

Chief, Special Procedures Staff) for the

Internal Revenue district in which the

levy was made." 26 C.F.R. sec. 301.6343-

2(b). The request must also contain

certain specific information, including

(1) the name and address of the person

submitting the request; (2) a detailed

description of the property levied upon;

(3) a description of the claimant’s basis

for claiming an interest in the property

levied upon; (4) the name and address of

the taxpayer, the originating Internal

Revenue district and the date of the

levy. See 26 C.F.R. sec. 301.6343-

2(b)(1)-(4). If the written request does

not contain the proper information, it

will still be considered an adequate

written request "unless a notification is

mailed by the director to the claimant

within 30 days of receipt of the request

to inform the claimant of the

inadequacies . . . ." 26 C.F.R. sec.

301.6343-2(c).

In this case, LaBonte addressed his

October 2, 1998 letter to Revenue Officer

Dale R. Veer, Special

Procedures/Advisory. Thus, he failed to

conform with Section 301.6343-2(b) which

clearly requires that the request be

"addressed to the district director

(marked for the attention of the Chief,

Special Procedures Staff)." If the

claimant fails to address his request to

the district director as required by the

regulations, he may not take advantage of

the twelve-month extension. See Amwest

Surety Insurance Co. v. United States, 28

F.3d 690, 697 (7th Cir. 1994). In Amwest,

a claimant addressed its written request

to the revenue officer in charge of the

case. The claimant and the IRS then

engaged in some limited discussion

regarding the levied property before the

claimant filed its lawsuit. Because the

lawsuit was not filed within nine months

of the levy, the claimant sought an

extension. We concluded that Amwest did

not qualify for the extension, and

therefore the district court lacked

subject matter jurisdiction, because the

regulations clearly require that the

request be sent to the district director

and Amwest’s "letters were not sent to

the proper party and consequently did not

constitute a ’written request for the

return of property’ pursuant to sec.

6532(c)(2)." Amwest, 28 F.3d at 696.

LaBonte argues that, unlike the request

in Amwest, he did not address his letter

to a revenue agent but rather to an agent

of the Special Advisory Procedures Staff,

thereby complying with the regulations

which require the request to be addressed

"marked for the attention of the Chief,

Special Procedures Staff." In addition,

LaBonte points out that his letter was

sent to the exact same address and fax

number as the district director, and that

it contained a specific request that the

"district director" grant him a discharge

of the escrowed proceeds. LaBonte may

have had good reason to hope that his

plea would eventually reach the attention

of the district director. Nevertheless,

LaBonte did not address his letter to the

district director, marked to the

attention of the Chief of the Special

Procedures Staff, as specifically

required by the plain language of Section

301.6343-2(b). We recognize, as we did in

Amwest, that this strict application of

the regulations seems harsh and we can

"think of no legitimate reason . . . why

[the IRS] would continue negotiating with

[LaBonte] without at least telling [him]

that [his] request should be directed to

the district director." Amwest, 28 F.3d

at 698. As the district court noted

during its hearing, we are especially

hard-pressed to explain the IRS’ behavior

in light of its recent efforts to improve

its image in the eyes of a skeptical

public. However, the conditions waiving

sovereign immunity "must be strictly

observed." Block, 461 U.S. at 287.

Accordingly, because LaBonte’s letter was

addressed to the wrong party, it does not

constitute a proper request under Section

6532(c)(2) and his untimely suit was

properly dismissed for lack of subject

matter jurisdiction./1

LaBonte argues that the IRS should be

equitably estopped from claiming that he

did not meet all the conditions for a

waiver of sovereign immunity. He argues

that the IRS representatives’ prolonged

negotiations with him, including their

apparent authority to conduct settlement

discussions, and the fact that they never

advised him that he had filed an improper

written request led him to believe that

he had filed a proper request and that

the proper officials at the IRS had

assumed control of the matter. In

response, the government argues that,

because the statute of limitations is a

jurisdictional bar rather than an

affirmative defense, equitable estoppel

is not allowed in wrongful levy actions.

See, e.g., Becton Dickinson & Co. v.

Wolckenhauer, 215 F.3d 340, 348-54 (3d

Cir. 2000) (barring application of

equitable tolling in wrongful levy

action).

The Seventh Circuit has not yet decided

whether the doctrine of equitable

estoppel may ever be invoked in wrongful

levy actions. Cf. Flight Attendants

Against UAL Offset (FAAUO) v.

Commissioner, 165 F.3d 572, 577 (7th Cir.

1999) (declining to decide whether the

doctrine of equitable tolling could be

invoked in a tax case). Likewise, we need

not do so today because LaBonte fails to

establish the elements of equitable

estoppel, particularly affirmative

misconduct by the government.

Equitable estoppel "allows delay in

suing when the defendant, in this case

the IRS, has taken steps to prevent the

plaintiff from suing in time." Id. at

575. Typically, the traditional elements

of equitable estoppel are: (1)

misrepresentation by the party against

whom estoppel is asserted; (2) reasonable

reliance on that misrepresentation by the

party asserting estoppel; and (3)

detriment to the party asserting

estoppel. Kennedy v. United States, 965

F.2d 413, 417 (7th Cir. 1992). However,

in suits against the government, one must

also establish affirmative misconduct on

the part of the government. Id.; Gibson

v. West, 201 F.3d 990, 994 (7th Cir.

2000). Affirmative misconduct is "more

than mere negligence. . . . It requires

an affirmative act to misrepresent or

mislead." Gibson, 201 F.3d at 994

(internal citations omitted).

Here, the IRS levied on the property on

January 20, 1998. In order to satisfy the

conditions for a waiver of sovereign

immunity, LaBonte needed to file his

wrongful levy action or submit a proper

written request to the IRS before October

20, 1998. Almost the full nine-month

period of limitations had passed before

LaBonte sent his inadequate letter on

October 2, 1998. Thereafter, negotiations

began and the statute of limitations ran

a mere twenty days later. There is no

allegation that the IRS representatives

affirmatively misled LaBonte by telling

him that he had filed a proper written

request under Section 6532(c)(2). Given

the short time period between the receipt

of the letter and the expiration of the

nine-month time period, we do not believe

that Agent Veer and District Counsel

Klein committed affirmative misconduct by

their failure to advise LaBonte that he

was about to miss the filing deadline. In

fact there is no indication in the

October 2, 1998 letter that it was

intended to do anything more than

negotiate a settlement. The letter makes

no reference to the statute or to the

regulations governing wrongful levies.

Even if the letter arguably met minimal

standards, the government’s failure to

advise LaBonte of the statute of

limitations "is an omission that at most

amounts to ordinary negligence. . . .

Indeed, . . . a government’s failure to

discharge an affirmative obligation is

not the same as engaging in affirmative

misconduct." Id. (internal quotations

omitted). After October 20, 1998, the

IRS’ continued participation in

negotiations could not have prevented

LaBonte from filing a timely lawsuit

because the nine-month period had

expired. Thus, those negotiations cannot

be the basis of equitable estoppel.

III. Conclusion

In sum, Congress has waived the

government’s sovereign immunity in

wrongful levy actions if a claimant files

suit within nine months from the date of

levy. See 26 U.S.C. sec. 6532(c)(1).

Because LaBonte did not file his action

until twenty months after the date of

levy, his action is time- barred. LaBonte

may not take advantage of the statutory

exception which extends the statute of

limitations because he did not file a

proper written request for the return of

property pursuant to 26 C.F.R. sec.

301.6343-2(b). Lastly, LaBonte cannot

establish all the elements of equitable

estoppel. Accordingly, we affirm the

judgment of the district court.

/1 The IRS also argues that LaBonte’s October 2,

1998 letter was not a proper request for the

return of property because it did not contain all

of the information required under Section 301.6-

343-2(b)(1)-(4). LaBonte responds that the regu-

lations required the district director to inform

the claimant of the inadequacies, which it failed

to do. See 26 C.F.R. sec. 301.6343-2(c). However,

because the written request was improperly ad-

dressed, we need not decide if it was also

inadequate. See Amwest, 28 F.3d at 697 (stating

"before the district director can notify the

claimant of any inadequacies, it is first neces-

sary that the district director actually received

the request.").