Petition for Writ of Certiorari — W. C. Garcia & Associates, Inc. v. Miceli

FILED

a}

— Supreme Court, U.S,

FEB 12 199

JOSEPH F. SPANIOL, JR,

TLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

>

W.C. GARCIA & ASSOCIATES, INC.,

Petitioner,

—_—V.—

FRANK S. MICELI, DISTRICT DIRECTOR,

INTERNAL REVENUE SERVICE,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JAMES F. KENNEDY

767 Fifth Avenue

47th Floor

New York, New York 10153

(212) 909-5340

Counsel of Record

GEORGE T. DONOGHUE, JR.

230 W. Monroe Street

Suite 2040

Chicago, Illinois 60606

(312) 236-4711

Attorneys for Petitioner

i

QUESTIONS PRESENTED

Section 6213(a) of the Internal Revenue Code provides, in

relevant part, that no assessment of a deficiency in respect of

the tax in issue and no levy or proceeding in court for its col-

lection shall be made, begun or prosecuted until a notice of

deficiency has been mailed to the taxpayer, nor until the

expiration of 90 days after such mailing, nor if a petition has

been filed with the Tax Court, until the decision of the Tax

Court has become final. It further provides: ‘‘. . . [T]he

making of such assessment or the beginning of such proceed-

ing or levy during the time such prohibition is in force may

be enjoined by a proceeding in the proper court.’’

The questions presented are:

1

i. Whether the court of appeals, by holding that an

injunction under § 6213(a) can not be issued unless the Tax-

payer shows it will suffer irreparable harm and it has no

other adequate legal remedy, has failed to follow this Court’s

implicit holding in Laing v. United States, 423 U.S. 161

(1976).

2. Whether the principle of ‘‘capable of repetition, yet

evading review’’, established in Southern Pacific Terminal

Co. v. Interstate Commerce Commission, 219 U.S. 498

(1911), prevents this case from being moot although the

Internal Revenue Service abated this second invalid assess-

ment for the same year made in violation of § 6213(a) after

this injunction suit was instituted, but before the district

court could rule on the merits of the suit.

i

PARTIES TO THE PROCEEDING

All parties to this proceeding are contained in the caption

of the case. There are no other corporations or persons who

are parties to the proceeding.

TABLE OF CONTENTS

PAGE

a ee ck cece Wak eeu naw ewh ce bee sends 1

ete ain de hehe bee koa be ad oases O88 ]

ee ee kn bk eke ab acess ob ecaadees 2

gE a ae 3

Reasons for granting the petition ................... 6

es 2k Chin Ged heed eu nace seeue 24

Appendix A

Memorandum of the United States Court of Appeals

for the Ninth Circuit, November 16, 1989......... la

Appendix B

Order of the District Court for the Northern District

rr Se PO ic cnessecceveeceeess 4a

iv

TABLE OF AUTHORITIES

Cases: PAGE

American Fruit Growers v. United States, 105 F.2d 722

et Sr SC Se nv Wei eRe Aa oak eeneae NK ore

Atchison, Topeka and Santa Fe Railway v. Lennen,

Fe & Fi ke Ag, | eres rrr rrr 12

Campbell v. United States, 532 F.2d 1057 (6th Cir.

OPEC T Tory ee TT eee ee TTT ST ee T PTI TT TT ee 10

Church of St. Matthew v. United States, F.Supp.

____, 56 AFTR2d 85-5809 (E.D.N.Y. 1985) ....... 23

Cool Fuel, Inc. v. Connett, 685 F.2d 309 (9th Cir.

PPC Se re eee TET CECT PE ETOP ST TT passim

First Federal Savings and Loan Association of Durham

v. James A. Baker, III, 860 F.2d 135 (4th Cir. 1988) 19

Flynn v. United States, 786 F.2d 586 (3rd Cir. 1986). 15

Golsen v. Commissioner, 54 T.C. 742 (1970), aff'd,

445 F.2d 985 (10 Cir. 1971), cert. denied, 404 U.S.

Fe SE oa UTA Rees hba a hcbeu deed aaa ew ewan 11

Interstate Commerce Commission v. B&T Transporta-

tion Co., 613 F.2d 1182 (ist Cir. 1980) ........... 18

Jensen v. Internal Revenue Service, 835 F.2d 196 (9th

See Se s Hh bans cckw sate cases heer cake uaess 11, 13

Kamholz v. Commissioner, 94 T.C. No. 2 (January 11,

PETROV ET ET TC ET TT eee tT re 0, 11, 13, 2

Koger v. United States, 755 F.2d 1094 (4th Cir. 1985) = 23

Laing v. United States, 423 U.S. 161 (1976)......... passim

Lovell! v. United States, 795 F.2d 976 (11th Cir. 1986) 15

Maxfield v. Commissioner, 153 F.2d 325 (9th Cir.

~~ tte

_

PAGE

Maxwell v. Campbell, 205 F.2d 461 (Sth Cir. 1953) .. 10

Mitchell v. DeMario Jewelry, 361 U.S. 288 (1960) ...16, 18

Peerless Woolen Mills v. Rose, 28 F.2d 661 (Sth Cir.

BPG 4 v4 KRG Gbbdn dha chee en aweRR taba awoke eewen 10

Perlowin v. Sassi, 711 F.2d 910 (9th Cir. 1983) ..... passim

Philadelphia & Reading Corp. v. Beck, 676 F.2d 1159

CP Gas SUED + ENCE R Ae dedend ees akaeeeaens 10

Porter v. Warner Holding Co., 328 U.S. 395 (1946).. 18

Rambo v. United States, 492 F.2d 1060 (6th Cir. 1974),

cert. denied, 423 U.S. 1091 (1976)......... 10, 15, 16, 19

ee es ct ern 22

Shadid v. Fleming, 160 F.2d 752 (10th Cir. 1947).... 12

Southern Pacific Terminal Co. v. Interstate Commerce

Commission, 219 U.S. 498 (1911)............... a

State of Tennessee v. Louisville and Nashville R.R.

Co., 478 F.Supp. 199 (M.D. Tenn. 1979).......... 12

Steiner v. Nelson, 259 F.2d 853 (7th Cir. 1958)...... 10

Trailer Train Co. v. State Board of Equalization, 697

F.2d 860 (9th Cir. 1983), cert. denied, 464 U.S. 846

fo Se re ose erp 12, 13

re Ae te a ee ey 6, 14, 15

United States v. City and County of San Francisco,

Fae Beek. ee ED 6b vans cekncksaseneneaeeeweine 12, 13

United States v. W.T. Grant Co., 345 U.S. 629

Sehkis chs 000.0444 006d a eae Kenn aee Aaa ae 20, 21

United States v. Zolla, 724 F.2d 808 (9th Cir. 1984),

cert. denied, 469 U.S. 830, reh’g denied, 469 U.S.

Se Ge os bh widened hadwereus ues sabes seeeen 8

vi

Wallin v. Commissioner, 744 F.2d 674 (9th Cir. 1984) 8

Weinberger v. Romero-Barcelo, 456 U.S. 305

CRUEEPA Se ee eee cnsiveucdesscaseandeneneeeees 6, 13, 14, 15

Welch v. Schweitzer, 106 F.2d 885 (9th Cir. 1939)... 8

Williams v. Alioto, 549 F.2d 136 (9th Cir. 1977)..... 21

Zernial v. United States, 714 F.2d 431 (Sth Cir. 1983) 19

Constitution, Statutes, and Treasury Regulations:

FPP UUT ET CO ETT OTE CO ee 7

Internal Revenue Code (26 U.S.C.):

ERROR nee Ba eee ere renin erie eS | passim

ee ee ekhaeteuank esse tunes 9, 10

DE S¥5 ck CORA RERKA AES ERED ORS KARAS ESE RRR 19

EE i a's'k 666.04 b4a nk 000006685008 be NOON OS 19, 20

Regulations:

ED as 5 6N OR AACR SORE CRRASSSASSERSNO OS 9

DS PUB OPURCOMAD occ cnccceccnestccenssauesenaee 10

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

No.

>_>

W.C. GARCIA & ASSOCIATES, INC.,

Petitioner,

—_—V.—

FRANK S. MICELI, DISTRICT DIRECTOR,

INTERNAL REVENUE SERVICE,

Respondent.

>_>

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

W.C. Garcia & Associates, Inc. petitions for a writ of cer-

tiorari to review the memorandum of the United States Court

of Appeals for the Ninth Circuit in this case.

OPINIONS BELOW

The memorandum of the court of appeals (App., A) is not

reported. The order of the District Court (App., B) is not

reported.

JURISDICTION

The memorandum of the court of appeals (App., A) was

entered on November 16, 1989. The jurisdiction of this Court

is invoked under 28 U.S.C. 1254(1).

2

STATUTES INVOLVED

2€ U.S.C. § 6213 RESTRICTIONS APPLICABLE TO

DEFICIENCIES; PETITION TO TAX COURT.

(a) Time for Filing Petition and Restriction on

Assessment.—Within 90 days, or 150 days if the notice is

addressed to a person outside the United States, after the

notice of deficiency authorized in section 6212 is mailed (not

counting Saturday, Sunday, or a legal holiday in the District

of Columbia as the last day), the taxpayer may file a petition

with the Tax Court for a redetermination of the deficiency.

Except as otherwise provided in section 6851 or section 6861

no assessment of a deficiency in respect of any tax imposed

by subtitle A or B, chapter 41, 42, 43, 44, and 45 and no levy

or proceeding in court for its collection shall be made, begun,

or prosecuted until such notice has been mailed to the tax-

payer, nor until the expiration of such 90-day or 150-day

period, as the case may be, nor, if a petition has been filed

with the Tax Court, until the decision of the Tax Court has

become final. Notwithstanding the provisions of section

7421(a), the making of such assessment or the beginning of

such proceeding or levy during the time such prohibition is in

force may be enjoined by a proceeding in the proper court.

26 U.S.C. § 7421 PROHIBITION OF SUITS TO

RESTRAIN ASSESSMENT OR COLLECTION.

(a) Tax.—Except as provided in sections 6212(a) and (c),

6213(a), 6672(b), 6694(c), 7426(a) and (b)(1), and 7429(b), no

suit for the purpose of restraining the assessment or collec-

tion of any tax shal] be maintained in any court by any per-

son, whether or not such person is the person against whom

such tax was assessed.

STATEMENT

Summary

This is the second time W.C. Garcia & Associates, Inc.

(the ‘‘Taxpayer’’), a corporation, has filed suit under 26

U.S.C. § 6213(a)' against the Internal Revenue Service

(‘‘IRS’’) for the same year to enjoin the IRS from assessing

and collecting a tax that was illegally assessed for the second

time. The IRS has illegally seized or collected at least

$172,243.50 based on the first assessment and collection

activities.” The second time the IRS sought to collect another

$2,876.84 in tax, penalty and interest in violation of

§ 6213(a).

When this suit was instituted in the district court, the IRS,

through the U.S. Attorney, threatened to seek sanctions if

the Taxpayer did not withdraw the suit. The Taxpayer

refused to do so and the Government then admitted the

1 All statutory references are to the Internal Revenue Code of 1954 (26

U.S.C.) in effect for the year in issue, unless otherwise noted.

2 When the first illegal assessment and collection action occurred, the

Taxpayer instituted an injunction action similar to the present one,

including a demand for the return of all funds seized or collected by

the IRS to satisfy the illegal assessment. That case was W.C. Garcia &

Associates, Inc. v. Michael D. Sassi, District Director, Internal Reve-

nue, No. C-84-0224-MHP; appealed to the Ninth Circuit, No. 84-2234;

petition for certiorari, No. 85-591.

The District Court (Patel, J.) denied the injunction based on Coo/

Fuel, Inc. v. Connett, 685 F.2d 309 (9h Cir. 1982) and Perlowin v.

Sassi, 711 F.2d 910 (%h Cir. 1983).

The Taxpayer then filed a notice of appeal to the Ninth Circuit but,

while the appeal was pending, the IRS demanded payment of the

$137,763.31 balance of the outstanding assessment. A check was sent

to the IRS under protest but the Ninth Circuit found that such check

was a payment and, therefore the case was moot.

When the Taxpayer filed its petition for certiorari, the Solicitor Gen-

eral wrote to the Cierk of the Court, stating that the United States

would not respond to The Taxpayer’s petition unless requested to do

so by the Court. The Clerk informed the Solicitor Genera! that the

Court requested a reply be submitted. After the reply was filed, the

Court denied certiorari.

a

4

assessment was in error. By that time the district court

already had jurisdiction of the injunction suit, which is the

sole remedy available by statute where such illegal assessment

or collection action occurs, and the Taxpayer still would not

withdraw its suit. Since the district court had jurisdiction to

issue an injunction under § 6213(a), it also had all the inher-

ent equitable powers for the proper and complete exercise of

that jurisdiction, whether or not an injunction was granted,

including entering an order that the IRS return all funds

seized or collected illegally.

The relief prayed for in the complaint was:

1. That IRS be enjoined and restrained from taking any

action to collect or otherwise enforce the tax, penalty

and interest assessed against the Taxpayer for the tax-

able year ended November 30, 1975;

2. That the IRS be ordered to return to the Taxpayer all

money received or seized to satisfy any illegal assess-

ments made for the taxable year ended November 30,

1975;

3. That the Taxpayer be awarded reasonable litigation

costs;’ and

4. That such other and further relief be granted the

Taxpayer as is deemed proper by the district court.

The IRS assessed the tax, penalty and interest against the

Taxpayer for the fiscal year ended November 30, 1975, with-

out first mailing a notice of deficiency as required by 26

U.S.C. § 6213(a). To collect this illegal assessment the IRS

filed a tax lien and served a notice of levy. The Taxpayer

refused to pay.

After the IRS admitted that the assessment was made in

error, it moved for summary judgment, and the Taxpayer

moved for summary judgment.

3. The award of litigation costs is not discussed further but is preserved

if the Taxpayer is granted relief.

5

The IRS argued in the district court that summary judg-

ment should be granted because the case was moot as a result

of the assessment being withdrawn and, in the alternative,

that an injunction could not be granted since the Taxpayer

did not prove that without an injunction it would suffer

irreparable harm and it had no adequate legal remedy as

required under Cool Fuel, Inc. v. Connett, supra, 685 F.2d

309 (9th Cir. 1982).

The district court held a hearing and ordered that the IRS

produce better proof that the assessment was abated and the

liens released. If the IRS did not do so, the district court

stated it would grant the Taxpayer an injunction. The IRS

submitted an affidavit that no further collection action would

be taken since the Taxpayer’s ‘‘account has been paid in

full.’”” The Government never stated in the affidavit, or in

any part of the record below, that collection action would

cease because the IRS had not complied with § 6213(a). To

the contrary, the Government argued, in the alternative, that

the district court did not have the authority to enjoin the

assessment and collection action even if the case were not

moot because the Taxpayer had not shown both irreparable

harm and no adequate legal remedy.

The district court then entered its order granting summary

judgment to the IRS and denying summary judgment to the

Taxpayer. In so ruling, the district court found the case to be

moot and, in the alternative, the requirements of Cool Fuel

were not met by the Taxpayer. The court of appeals affirmed

on both grounds.

The IRS transcript of account for the year ended Novem-

ber 30, 1975, reflects that the IRS has collected at least

$172,243.50 from the Taxpayer based on the first invalid

assessment of a personal holding company tax of $82,833.80

plus related interest and penalties, without having ever issued

a notice of deficiency.

In the Ninth Circuit the Taxpayer argued that Coo/ Fuel,

Inc. v. Connett, supra, 685 F.2d 309 (9th Cir. 1982) and

Perlowin v. Sassi, supra, 711 F.2d 910 (9th Cir. 1983), which

6

were relied upon by the Government, were contrary to this

Court’s opinion in Laing v. United States, 423 U.S. 161

(1976), and that Weinberger v. Romero-Barcelo, 456 U.S.

305 (1982), was misapplied by the Ninth Circuit in Coo/ Fuel,

Inc. v. Connett, supra, 685 F.2d at 313. Cool Fuel, Inc. v.

Connett, supra, and Perlowin v. Sassi, supra, stand for the

principle that to obtain an injunction under Section 6213(a) a

taxpayer must show irreparable harm and no adequate rem-

edy at law, and that a notice of deficiency was not sent. The

Taxpayer argued that in Laing v. United States, supra, this

Court, in granting an injunction under Section 6213(a), did

not mention irreparable harm or no adequate remedy at law,

and Mr. Laing could not have met such a burden of proof if

so required.

The Taxpayer also argued that even if the injunction

should not be granted, the district court should have ordered

the return of the money seized and collected in violation of

§ 6213(a) since the district court had all the inherent equitable

powers to do so under the injunction action.

The Taxpayer further argued that the case was not moot

because of the principle of ‘‘capable of repetition, yet evad-

ing review’’ established in Southern Pacific Terminal Co. v.

Interstate Commerce Commission, 219 U.S. 498 (1911), and

applied in subsequent cases of this Court.

REASONS FOR GRANTING THE PETITION

This case provides the opportunity to correct the misappli-

cation by the Ninth Circuit of opinions of this Court. We

believe the court of appeals erred in Cool Fuel, Inc. v. Con-

nett, supra, 685 F.2d 309 (9th Cir. 1982) and Perlowin v.

Sassi, supra, 711 F.2d 910 (9th Cir. 1983) by failing to follow

Laing v. United States, supra, 423 U.S. 161 (1976), by misap-

plying Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982),

and in failing to apply TVA v. Hill, 437 U.S. 153 (1978).

Those errors have spread to other circuits and the Govern-

ment continues to rely on the Ninth Circuit’s errors when it

etter arent

5

conducts illegal assessment and collection activities. Fortui-

tously, in January, 1990, the United States Tax Court, in a

publised decision, refused to apply the Ninth Circuit’s opin-

ions in Cool Fuel and Perlowin in an injunction action

against the IRS.

The Ninth Circuit in this case also failed to apply properly

the principle of ‘‘capable of repetition, yet evading review’’

established in Southern Pacific Terminal Co. v. Interstate

Commerce Commission, supra, 219 U.S. 498 (1911).

I

The Ninth Circuit, in holding that the Taxpayer must

establish irreparable harm and no adequate legal remedy in

seeking an injunction under § 6213(a), is in conflict with the

implicit holding of the Court in Laing v. United States,

supra.

26 U.S.C. § 6213(a) requires the IRS to mail a notice of

deficiency to a taxpayer at the taxpayer’s last known address

if the IRS has determined that there is a deficiency in tax

before it can assess and collect the deficiency. (None of the

exceptions to this rule contained in § 6213 are relevant in this

case.) The IRS must wait at least 90 days after mailing the

notice of deficiency before any collection action may com-

mence, and it must wait longer if the taxpayer chooses to

contest in the United States Tax Court the correctness of the

notice of deficiency. In that situation, no assessment or col-

lection action may begin until the Tax Court decision

becomes final. If the IRS attempts to make an assessment or

begin any collection action without properly mailing the

notice of deficiency, an injunction against such action may be

issued by the District Court under § 6213(a), which is the sole

remedy provided by law against violations by the IRS of

§ 6213(a).

Two basic types of procedural tax litigation have resulted

from § 6213(a). The first involves the issue of whether the

notice of deficiency was mailed to the taxpayer at the taxpay-

8

er’s ‘‘last known address.’’ In such cases a notice has been

mailed and the IRS usually uses the address shown on the

return which it has examined, but litigation results because

the taxpayer may have moved since filing the return and

claims some notification may have been given to alert the

IRS that the taxpayer has a different address.

The Ninth Court has a long history of requiring the IRS to

utilize the information it has available in mailing notices of

deficiency to taxpayers at their last known addresses, thus

protecting taxpayers from invalid assessment and collection

activities. See, e.g., Welch v. Schweitzer, 106 F.2d 885 (9th

Cir. 1939); Wallin v. Commissioner, 744 F.2d 674 (9th Cir.

1984); United States v. Zolla, 724 F.2d 808 (9th Cir. 1984),

cert. denied, 469 U.S. 830, reh’g denied, 469 U.S. 1067

(1984); Cool Fuel, Inc. v. Connett, supra; Maxfield v. Com-

missioner, 153 F.2d 325 (9th Cir. 1946).

There is an inconsistency in the court of appeals when it

holds notices of deficiency invalid, and implicitly finds

related assessments invalid, where such a notice is not sent to

the taxpayer’s last known address without considering either

irreparable harm or other adequate remedy, but takes no

action when assessments are made or collection action occurs

without any notice of deficiency being sent to the taxpayer. It

follows with even more certainty where no notice of defi-

ciency is ever mailed to a taxpayer, assessments against such

taxpayers must be invalid, regardless of the taxpayers’ ability

to pay such assessments and sue for refunds.

The second type of procedural litigation under § 6213(a)

involves cases where assessment and collection action is

threatened or commenced by the IRS without issuance of a

notice of deficiency. It is this conduct by the IRS that caused

the filing of this ’awsuit. There is no dispute that an assess-

ment was made by the IRS against the Taxpayer without issu-

ance of a notice of deficiency for the year in issue, that

demand was made and liens filed by the IRS for collection of

the amount assessed, that a notice of levy was served on the

Taxpayer for the amount assessed, that this was the second

9

invalid assessment made against the Taxpayer by the IRS for

the same taxable year, that the IRS has already obtained at

least $172,243.50 from the first illegal assessment, and that

the IRS, through its lawyer, threatened to seek sanctions

from the district court if the Taxpayer would not withdraw

this suit.

After the Taxpayer refused to withdraw the complaint, the

IRS then admitted the assessment was in error, ceased further

collection action, including releasing all liens and the levy

served, and claimed the case was therefore moot.

The IRS also argued that even though it was wrong to

make the assessment, file liens and serve levies, the district

court could not issue an injunction, which is the sole remedy

allowed by statute for violation by the IRS of § 6213(a).

The IRS based this argument on Cool Fuel, Inc. v. Con-

nett, supra, and Perlowin v. Sassi, supra, which hold where

such assessment and collection action by the IRS is shown to

exist without issuance of a notice of deficiency, the taxpayer

must also show that without an injunction the taxpayer will

suffer irreparable harm and that the taxpayer has no other

adequate legal remedy. If a taxpayer has the funds to pay an

invalid assessment without serious financial harm and can

then sue for a refund, it is the position of the Ninth Circuit

that irreparable harm and no adequate legal remedy have not

been proven.

The Government’s argument is contrary to a recent pro-

nouncement by the United States Treasury. On May 5, 1989,

the Secretary of the Treasury published regulations required

by 26 U.S.C. § 6326 (added by § 6238(a) of Public Law 100-

647, November 10, 1988), which allows any person to appeal

to the district director after the filing of a notice of a lien for

a release of such lien alleging an error in the filing of the

notice of such lien. Temp. Reg. § 301.6326-IT(a). One of the

four allegations which must be considered for an appeal of

the filing of notice of federal tax lien is:

10

‘*The tax liability that gave rise to the lien was assessed

in violation of the deficiency procedures set forth in sec-

tion 6213 of the Internal Revenue Code.’’

Temp. Reg. § 301.6326-IT(b)(2).

There is no requirement in the regulations or in § 6326 that

a taxpayer must also show irreparable harm and no adequate

remedy at law in order to seek the administrative relief from

an erroneously filed notice of lien. Since the filing of a tax

lien is one of the steps taken by the IRS to collect tax

referred to in § 6213(a), and since all collection of tax must

be in compliance with § 6213(a), it follows that the Govern-

ment’s argument in this case as to irreparable harm and no

adequate remedy is now contradicted by this regulation issued

under 26 U.S.C. § 6326.

The holding of the Ninth Circuit here is based on its opin-

ions in Cool Fuel, Inc. v. Connett, supra, and Perlowin v.

Sassi, supra. Those two cases are in conflict with Laing v.

United States, supra; Steiner v. Nelson, 259 F.2d 853 (7th

Cir. 1958); Philadelphia & Reading Corp. v. Beck, 676 F.2d

1159 (7th Cir. 1982); Campbell v. United States, 532 F.2d

1057 (oth Cir. 1976); Rambo v. United States, 492 F.2d 1060

(6th Cir. 1974), cert. denied, 423 U.S. 1091 (1976); Maxwell

v. Campbell, 205 F.2d 461 (Sth Cir. 1953); and Peerless

Woolen Mills v. Rose, 28 F.2d 661 (Sth Cir. 1928).

Cocl Fuel and Perlowin are rejected by a recent United

States Tax Court case, Kamholz v. Commissioner, 94 T.C.

No. 2 (Prentice-Hall) (January 11, 1990), where the Tax

Court enjoined the IRS from collecting a premature assess-

ment before the time requirements are honored as listed in

§ 6213(a), and the Tax Court did not require the taxpayer to

prove irreparable harm and no adequate legal remedy. The

Tax Court acknowledged the position of the Ninth Circuit,

when it said:

**Section 6213(a) speaks permissively by providing that

premature assessments and collections ‘may be enjoined’

(emphasis added) by this Court. The Ninth Circuit,

ee

1]

where appeal of this case would lie, has rejected the

argument that proof of an improper assessment man-

dates injunctive relief. Along with a showing of

improper assessment, the taxpayer must prove irrepara-

ble injury and an absence of an adequate legal remedy

(i.e., the payment of tax followed by a suit for refund).

Jensen v. Internal Revenue Service, 835 F.2d 196, 198

(9th Cir. 1987); Perlowin v. Sassi, 711 F.2d 910, 912

(Oth Cir. 1983); Cool Fuel, Inc. v. Connett, 685 F.2d

309, 313 (9th Cir. 1982).

Id. at 94-10.

The Tax Court then distinguished Kamholz from Cool

Fuel, Perlowin and Jensen by finding those cases did not

involve collection activities by the IRS during a pendency of

a case in the Tax Court. Such distinction is not relevant,

however, to the interpretation of § 6213(a) in this case

because that section does not hint that the application of the

injunction remedy should be different where a Tax Court suit

is pending.‘

The court of appeals in Coo/ Fuel held that for a taxpayer

to obtain an injunction under § 6213(a), when no notice of

deficiency has been mailed, the taxpayer must first establish

the standard requirements for equitable relief, i.e., that it will

suffer irreparable injury and that it lacks an adequate legal

remedy. However, since an injunction is the only expressed

remedy contained in § 6213(a), the standard requirements for

4 § 6213(a) was amended by § 6243(a) of Public Law 100-647, Novem-

ber 10, 1988, which extended jurisdiction to the Tax Court under lim-

ited circumstances also to grant injunctions.

It is relevant that the Tax Court acknowledged an appeal from its

decision in Kamholz is to the Ninth Circuit yet it did not follow the

Ninth Circuit’s opinion in Cool Fuel, Perlowin and Jensen. It is the

expressed practice of the Tax Court to follow the law of the court of

appeals to which its decision is appealable where squarely in point.

Golsen v. Commissioner, 54 T.C. 742, 757 (1970) aff’d without discus-

sion on this point, 445 F.2d 985 (10th Cir. 1971), cert. denied 404 U.S.

940 (1971). Here, the Tax Court properly avoided applying that

practice.

12

equitable relief need not be satisfied. Trailer Train Co. v.

State Board of Equalization, 697 F.2d 860 at 869 (9th Cir.

1983), cert. denied, 464 U.S. 846 (1983). In rejecting the

argument that the district court erred in granting a prelimi-

nary injunction without first requiring the establishment of

the standard equitable prerequisites for such relief, the Ninth

Circuit there stated at page 869:

The standard requirements for equitable relief need not

be satisfied when an injunction is sought to prevent the

violation of a federal statute which specifically provides

for injunctive relief. Atchison, Topeka and Santa Fe

Railway v. Lennen, 640 F.2d 255, 259-261 (10th Cir.

1981); see United States v. City and County of San

Francisco, 310 U.S. 16, 30-31 60 S. Ct. 749, 756-57, 84

L.Ed. 1050 (1940). Section 11503 clearly falls within this

exception because its subsection (c) specifically autho-

rizes a district court to grant injunctive relief to prevent

a violation of the statute. See Atchinson, Topeka and

Santa Fe Railway v. Lennen, 640 F.2d 255 (expressly

applying exception to § 11503). The Board provides no

convincing reason why this exception should not apply

in the present case. (Footnote omitted.)°

Here it has been shown that § 6213(a) specifically provides

for an injunction as the sole remedy for violation of the

notice and collection requirements yet the IRS has not

attempted to give any convincing reason why this exception

should not apply. In Shadid v. Fleming, supra, at 753, the

Tenth Circuit said that where it is clear the statute authorizes

5 Also see, United States v. City and County of San Francisco, 310

U.S. 16 (1940); American Fruit Growers v. United States, 105 F.2d 722

(9th Cir. 1939); Atchinson, Topeka and Santa Fe Railway v. Lennen,

640 F.2d 255 (10th Cir. 1981), relied upon by the Ninth Circuit in

Trailer Train Co. v. State Board of Equalization, supra; State of Ten-

nessee v. Louisville and Nashville R.R. Co., 478 F. Supp. 199 (M.D.

Tenn. 1979); and Shadid v. Fleming, 160 F.2d 752 (10th Cir. 1947).

Without saying it, this Court in Laing v. U.S., supra, 423 U.S. 161

(1976), in a § 6213(a) injunction suit, endorsed the rule reflected in

these cases.

aerate etree

13

the district court to grant injunctive relief to prevent, restrain

or terminate violaticn of the Act in issue, the discretion of

the trial court in issuing or withholding an injunction is to be

exercised in light of the objectives of the Act.

Here, as in the cases such as United States v. City and

County of San Francisco and Trailer Train v. State Board of

Equalization, the standard requirements for equitable relief

need not be satisfied and the discretion of the district court in

issuing or withholding an injunction should be exercised in

the light of the objective of § 6213(a). Unless the restrictions

on assessment and collection of income tax contained in

§ 6213(a) are complied with, the section would be a mere idle

gesture and would serve no purpose. Cf., American Fruit

Growers v. United States, supra, 105 F.2d at 725. Nor would

it make any sense to litigate issues concerning notices not

being mailed to the taxpayers’ last known addresses if the

IRS could still assess and collect the additional taxes claimed

after losing such cases.

Cool Fuel is based on a misapplication of Weinberger v.

Romero-Barcelo, supra, 456 U.S. 305 (1982), and it also fails

to follow Laing v. United States, supra, 423 U.S. 161 (1976).

Furthermore, it has been eroded in Jensen v. Internal Reve-

nue Service, 835 F.2d 196 (9th Cir. 1987), where the court of

appeals adopts some of the concern reflected by this Court in

Laing v. United States, supra, about denying a taxpayer

access to the Tax Court, although still fails to follow it com-

pletely. The Tax Court’s recent opinion in Kamholz v. Com-

missioner, supra, is a clear challenge to the correctness of

Cool Fuel.

Weinberger v. Romero-Barcelo, supra, was an injunction

action to stop the United States Navy from polluting the

waters off the coast of Puerto Rico. It is incorrectly relied

upon by the Ninth Circuit in Cool Fuel because the control-

ling statute in Weinberger allowed for other remedies and an

injunction was not the only means of ensuring compliance

(id. at 314); but under § 6213(a) an injunction is the sole

remedy authorized by Congress. The Court in Weinberger

EE

14

recognized the exception to the requirement of showing the

usual equitable grounds for obtaining an injunction where the

purpose and language of the statute limited the remedies

available to the district court if only an injunction could vin-

dicate the objectives of the law, and further indicated that

was not the case in Weinberger. 456 U.S. at 314. The Ninth

Circuit should have applied this principle in Coo/ Fuel v.

Connett, but it failed to do so.

The Court in Weinberger v. Romero-Barcelo, supra at 314,

distinguished it from TVA v. Hill, supra, 437 U.S. 153

(1978), in which an injunction was granted under a statute

that contained a flat ban on the challenged act, just as in this

case § 6213(a) contains a flat ban on the challenged assess-

ment and collection action. The Court also distinguished

TVA v. Hill by showing that refusal to enjoin the challenged

action there Would have ignored the explicit provisions of the

governing act, stating that the purpose and language of the

statute limited the remedies available to the district court and

only an injunction could vindicate the objectives of the act.

Weinberger v. Romero-Barcelo, supra, at 314. So too in this

case, the denial of an injunction will defeat the expressed

purposes of § 6213(a), particularly since the only remedy

Congress has authorized is an injunction to prevent the very

conduct threatened and committed.

In Weinberger v. Romero-Barcelo, the district court, the

court of appeals, and the Supreme Court agreed some action

had to be taken against the violation of the law; their differ-

ences centered on whether it should be an injunction. Here,

§ 6213(a) has been violated by the IRS, but if an injunction is

not granted, no other action can be taken against the IRS.

In Laing v. United States, supra, the Court, in an exhaus-

tive opinion, held that the failure of the IRS to issue a notice

of deficiency in income tax and the consequent unavailability

of a remedy in the Tax Court entitled the taxpayers to

injunctive relief under § 6213(a) against a termination assess-

ment of income tax made in violation of the section. Neither

the majority nor the minority conditioned injunctive relief

15

under § 6213(a) upon a showing by the taxpayers of irrepara-

ble injury or inadequate legal remedy other than the making

of an illegal assessment of income tax without prior issuance

of a notice of deficiency, the effect being to prevent the tax-

payers from using the Tax Court. Jd. at 184, n. 27, 190, 195.°

The court of appeals here does not attempt to reconcile the

IRS’s conduct with the absolute prohibition in § 6213(a)

against such conduct, i.e., assessment and collection action

without first issuing a notice of deficiency. Instead, it finds

itself powerless to do anything to the IRS for such violation

because § 6213(a) only allows for an injunction to be issued

and, relying on Cool Fuel and Perlowin, contends that the

Taxpayer must also prove irreparable harm and no adequate

remedy if an injunction is to be issued.

The Ninth Circuit refrained from answering the Taxpayer’s

argument that Cool Fuel and Perlowin misapply opinons of

this Court. Instead it merely sustained the district court by

stating that there had been no showing in this case of irrepa-

rable injury and the absence of an adequate legal remedy.

The court of appeals erred in such holding.’

6 Unfortunately, other circuits have relied upon the requirements of

Cool Fuel and related cases that taxpayers show irreparable harm and

no adequate remedy in considering a § 6213(a) injunction, but they too

have not attempted to reconcile the inconsistency of those require-

ments with Laing v. United States nor have they scrutinized Wein-

berger v. Romero-Barcelo, supra, 456 U.S. 305 (1982), the primary

case relied upon by the Ninth Circuit in Coo! Fuel and which we

believe the court of appeals has misapplied, or TVA v. Hill, supra, 437

U.S. 153 (1978), which is applicable in this case. E.g., Lovell v. United

States, 795 F.2d 976 (11th Cir. 1986); Flynn v. United States, 786 F.2d

$86 (3rd Cir. 1986).

7 There is strong support for the argument that the assessing and col-

lecting of the income tax in this case without having complied with the

requirements for issuing a notice of deficiency results in violation of

the due process clause of the Fifth Amendment. The Sixth Circuit in

Rambo v. United States, supra, at 1064-65, a § 6213(a) injunction suit,

said:

(Footnote continued)

i6

Il

SINCE THE DISTRICT COURT HAD JURISDICTION

TO ISSUE AN INJUNCTION UNDER § 6213(a), IT HAD

ALL THE INHERENT EQUITABLE POWERS FOR THE

PROPER AND COMPLETE EXERCISE OF THAT JURIS-

DICTION WHETHER OR NOT AN INJUNCTION WAS

GRANTED.

Once a court has jurisdiction in an injunction action, even

if an injunction is the sole remedy expressly authorized by

statute, the district court has all the inherent equitable powers

available to it for the proper and complete exercise of that

jurisdiction. For example, in Mitchell v. DeMario Jewelry,

361 U.S. 288 (1960), the issue was whether, in an action

brought by the Secretary of Labor to enjoin violations of

§ 15(a)(3) of the Fair Labor Standards Act of 1938, Section

17 of that Act empowers a district court to order reimburse-

ment for loss of wages caused by an unlawful discharge or

other discrimination. Section 17 gives district courts jurisdic-

tion: ‘‘for cause shown, to restrain violations of section 15.”’

As to the question of whether the district court had jurisdic-

Were the code to be interpreted as the I.R.S. suggests, significant

constitutional problems would arise. A system that permits the gov-

ernment to seize and sell property without affording the taxpayer

any Opportunity for a judicial determination of the validity of the

tax prior to payment could very well raise a serious question of a

denial to the taxpayer of his property without due process of

ae

Since we conclude that the taxpayer has been denied the proce-

dural safeguards set forth herein, including access to the tax court

for redetermination of the tax imposed, we affirm the judgment of

the district court.

The Court in Laing in footnote 26 (423 U.S. at 183-184) also

acknowledged the due process argument but, as the Sixth Circuit did in

Rambo, the Court did not decide the issue because the Court agreed

with the taxpayers’ construction of the Code, i.e., a notice of defi-

ciency was required to be issued and absent one, an injunction lies.

Likewise, we believe this case shou!d be resolved under Laing v. United

States, supra, without having to resolve the due process issue.

17

tion to order reimbursement of lost wages the Court said at

291:

. . . The court below took as the touchstone for deci-

sion the principle that to be upheld the jurisdiction here

contested ‘must be expressly conferred by an act of Con-

gress or be necessarily implied from a congressional

enactment.’ 260 F.2d, at 933. In this the court was mis-

taken. The proper criterion is that laid down in Porter

v. Warner Co., 328 U.S. 395. This Court there dealt

with an action brought by the Price Administration

under the Emergency Price Control Act of 1942 to

enjoin the collection of excessive rents and to require the

landlord to reimburse its tenants for moneys paid as a

result of past violations. We upheld the implied power

to order reimbursement, in language of the greatest rele-

vance here:

‘*Thus the Administrator invoked the jurisdiction of

the District Court te enjoin acts and practices made

illegal by the Act and to enforce compliance with the

Act. Such a jurisdiction is an equitable one. Unless

otherwise provided by statute, all the inherent equita-

ble powers of the District Court are available for the

proper and complete exercise of that jurisdiction. And

since the public interest is involved in a proceeding of

this nature, those equitable powers assume an even

broader and more flexible charter than when only a

private controversy is at stake. . . . [T]he court may

go beyond the matters immediately underlying its

equitable jurisdiction . . . and give whatever other

relief may be necessary under the circumstances. .. .

‘‘Moreover, the comprehensiveness of this equitable

jurisdiction is not to be denied or limited in the

absence of a clear and valid legislative command.

Unless a statute in so many words, or by a necessary

and inescapable inference, restricts the court’s juris-

diction in equity, the full scope of that jurisdiction is

to be recognized and applied. ‘The great principles of

I

18

equity, securing complete justice, should not be

yielded to light inferences, or doubtful construction.’

Brown v. Swann, 10 Pet. 497, 503. . . .” 328 U.S., at

397-98.

The applicability of this principle is not to be denied,

either because the Court there considered a wartime stat-

ute, or because, having set forth the governing inquiry,

it went on to find in the language of the statute affirma-

tive confirmation of the power to order reimbursement.

Id., at 399. When Congress entrusts to an equity court

the enforcement of prohibitions contained in a regula-

tory enactment, it must be taken to have acted cognizant

of the historic power of equity to provide complete relief

in light of the statutory purposes. As this Court long

ago recognized, ‘there is inherent in the Courts of

Equity a jurisdiction to. . . give effect to the policy of

the legislature.’ Clark v. Smith, 13 Pet. 195, 203... .

Even though an injunction was granted in Mitchell v.

DeMario Jewelry Inc., supra, there was no holding that a

showing of a right to an injunction was a prerequisite to the

obtaining of an order of reimbursement. Also see, /nterstate

Commerce Commission v. B&T Transportation Co., 613

F.2d 1182 (ist Cir. 1980), where an injunction was denied as

moot but the issue of restitution for alleged violations of the

Motor Carrier Act of 1935 was held to be properly before the

district court, although the relevant section of the Motor Car-

rier Act only expressly authorized prospective injunctions to

restrain future conduct, not restitution. There the First Cir-

cuit relied on Porter v. Warner Holding Co., 328 U.S. 395

(1946) and Mitchell v. DeMario Jewelry, Inc., supra.

The court of appeals erred in not ordering the return to the

Taxpayer of all funds seized or collected in satisfaction of the

illegal assessments, regardless of whether the injunction

should have been granted.

19

Ill

IT IS NOT NECESSARY FOR THE TAXPAYER TO

INSTITUTE A REFUND SUIT IN ORDER TO OBTAIN

THE MONEY SEIZED AND COLLECTED BY THE IRS

BASED ON ITS ILLEGAL ASSESSMENT AND COLLEC-

TION ACTIONS.

The court of appeals erred in agreeing with the district

court that the Taxpayer was attempting to use this injunction

action in lieu of an action for refund and avoid the jurisdic-

tional prerequisites for suits for refund under 26 U.S.C.

§ 7422(a) and seemed to imply that money or property seized

by the IRS in satisfaction of illegal assessments can only be

recovered by suits for refund. The only case cited by the dis-

trict court in support of its holding is Zernial v. United

States, 714 F.2d 431, 434 (Sth Cir. 1983). There the Fifth Cir-

cuit held it was proper to dismiss that part of the taxpayer’s

suit seeking injunctive relief because subject matter jurisdic-

tion was lacking, citing 26 U.S.C. § 7421(a), commonly

known as the Anti-Injunction Act. Since this injunction suit

is instituted under § 6213(a), an expressed exception to

§ 7421(a), the district court here had jurisdiction, and once

equitable jurisdiction is found, the district court has all the

inherent equitable powers available to it for the proper and

complete exercise of that jurisdiction. Zernial, thus, is not

applicable.

The district court agreed that such funds could be returned

without a refund suit being instituted if a right to an injunc-

tion is established, citing Rambo v. United States, supra. Tax

dollars improperly retained by the IRS, although initially

obtained properly under the law, have been ordered returned

to the taxpayer under mandamus actions. Vishnevsky v.

United States, 581 F.2d 1249 (7th Cir. 1978), and First Fed-

eral Savings and Loan Association of Durham v. James A.

Baker, III, 860 F.2d 135 (4th Cir. 1988). Here the funds

seized by the IRS have, from the beginning, been obtained

and retained in violation of the law. Under appropriate cir-

cumstances tax dollars can be ordered returned to taxpayers

20

in injunction actions and mandamus actions, and not just in

refund suits.

This is not a refund suit and the court of appeals erred in

considering it as such. In Vishnevsky the Seventh Circuit cor-

rected the district court’s attempt to decide that case as a

refund suit (581 F.2d at 1251-53) when it was instituted as a

mandamus action, and the court of appeals here erred in

deciding this case based on § 7422(a) instead of § 6213(a).

IV

THIS CASE IS NOT MOOT AS THE RESULT OF THE

IRS HAVING ABATED THE ASSESSMENT AND SUB-

MITTING AN AFFIDAVIT THAT NO FURTHER COL-

LECTION ACTIONS WILL BE TAKEN WITH RESPECT

TO THE 1975 TAX YEAR AND ALL LIENS FILED IN

CONNECTION THEREWITH HAVE BEEN RELEASED.

The court of appeals acknowledged that the IRS sought for

the second time to collect on a deficiency without the requi-

site notice of deficiency having been mailed to the Taxpayer

in violation of § 6213(a), but concluded there was no showing

that it was likely to occur again, citing United States v. W.T.

Grant Co., 345 U.S. 629, 633 (1953). But the criteria consid-

ered by the Court in that case, when considered in this case,

should result here in a different conclusion. That case

involved an injunction action by the United States against an

individual and six corporations for violating the Clayton Act

through the holding by the individual of interlocking direc-

torates in three pairs of competing corporations. There the

Court stated the individual defendant did not follow one

adjudicated violation with others; here the IRS has twice vio-

lated the assessment procedures but contends the district

court cannot stop the IRS. In United States v. W.T. Grant

Co., there was some question by both sides as to the legality

of the defendant’s actions; there has never been a question

here that the conduct of the IRS is illegal. The Court, in

United States v. W.T. Grant Co., said it was for the defen-

21

dant to show that ‘‘there is no reasonable expectation that

the wrong will be repeated.’’ Jd., at 633. The defendants

informed the district court that the interlocks no longer

existed and disclaimed any intention to revive them, yet the

Court stated: ‘‘Such a profession does not suffice to make a

case moot although it is one of the factors to be considered

in determining the appropriateness of granting an injunction

against the now-discontinued acts.’’ Jd., at 633. The Govern-

ment here carefully avoided saying it will take no further

assessment action against the Taxpayer in violation of

§ 6213(a).

The facts in United States v. W.T. Grant Co., are clearly

distinguishable from this case and the application of princi-

ples considered in United States v. W.T. Grant Co. to the

facts in this case should result in finding this injunction issue

is still alive.

Moreover, the court of appeals did not reconcile its posi-

tion with Williams v. Alioto, 549 F.2d 136 (9th Cir. 1977).

There the Ninth Circuit said in such cases the Government

has a heavy burden of showing that it will not renew its chal-

lenged conduct, and mere disclaimers are not satisfactory. Jd.

at 143. Also see United States v. W.T. Grant Co., supra, at

633. Here the Government has not attempted to meet its

heavy burden and the court of appeals has ignored such

defect in the Government’s case. Nor has the Ninth Circuit

attempted to reconcile its conclusion with the Government’s

failure even to disclaim for the future such assessment and

collection action without issuing the requisite notice of defi-

ciency. The Government, instead, carefully avoided such dis-

claimer by only stating the Taxpayer’s account is paid in full.

A third assessment will then make the account unpaid, and

the IRS will be right back seizing assets and threatening the

Taxpayer with sanctions, as it claims it can do without any

action being taken by the district court to stop it. If it does

so the Government cannot be reprimanded for such illegal

action since it never said it would not make illegal assess-

ments again nor attempt to collect such illegal assessments

again. Nor can the Taxpayer comply with the requirements of

22

Cool Fuel v. Connett, i.e., it can not show irreparable harm

and no adequate legal remedy as required by the Ninth Cir-

cuit before an injunction can be granted under § 6213(a). The

Taxpayer’s rights can continue to be violated with impunity

unless an injunction is granted.

Even if the assessment in issue was abated and all levy and

collection action has terminated, where the conduct com-

plained of is ‘‘capable of repetition, yet evading review,’’ an

injunction can still be issued. Southern Pacific Terminal Co.

v. Interstate Commerce Commission, supra, 219 U.S. 498

(1911). There the Supreme Court said at 515:

. . « The questions involved in the orders of the Inter-

state Commerce Commission are usually continuing (as

are manifestly those in the case at bar) and their consid-

eration ought not to be, as they might be, defeated, by

short term orders, capable of repetition, yet evading

review, and at one time the Government and at another

time the carriers have their rights determined by the

Commission without a chance of redress.

Likewise, in this case the IRS can abate an assessment and

stop collection proceedings while the injunction action is

pending, but that, the Court holds, does not moot the law-

suit.

In Roe v. Wade, 410 U.S. 113 (1973), where Roe sought a

declaratory judgment that the Texas criminal abortion stat-

utes were unconstitutional on their face and an injunction

restraining Wade from enforcing them, the Court considered

whether the class action case became moot since Roe was no

longer pregnant prior to the Supreme Court ruling. Jd. at

123-25. The Court, in considering applying the doctrine of

‘‘capable of repetition, yet evading review’’, found that when

Roe filed her suit she presented a case or controversy and,

wholly apart from the class aspects, she, as a pregnant

woman, had standing to challenge those Texas statutes. Rec-

ognizing that pregnancy often comes more than once to the

23

same woman, the Court found that Roe’s case was not moot.

Id. at 125.

There is no need to speculate whether the IRS would ever

make another assessment against the Taxpayer, file liens, levy

and seize its assets without having issued a notice of defi-

ciency. This is the second time for the same taxable year such

illegal conduct has been committed by the IRS against the

Taxpayer, and the IRS fails to acknowledge such assess-

ments, levy and collection actions are in absolute violation of

§ 6213(a). Since two such assessment and collection activities

have been instituted against the Taxpayer, it is reasonable to

expect that the IRS will do it again at its sole discretion if it

is so moved.® It is also reasonable to expect that if there are

any subsequent illegal assessments, the IRS will again

threaten to seize the Taxpayer’s assets, as was done in the

first case, or threaten the Taxpayer with sanctions if such ille-

gal assessments are protested in court and are not paid, just

as was done in this case. The IRS could either threaten to

seize assets over the Taxpayer’s protests and attempt to con-

vince a court such amounts are payments, as the IRS did in

the first case, or it can abate the illegal assessment, as it did

in this case, but claim under either method that the case is

moot before the injunction action can be fully reviewed. The

IRS ought not be allowed to do this.

The court of appeals erred in finding this case to be moot.

8 The IRS has also taken this position against other taxpayers. E.g.,

Koger v. United States, 755 F.2d 1094 (4th Cir. 1985); Church of St.

Matthew v. United States, F.Supp. , 56 AFTR2d 85-5809

(E.D.N.Y. 1985); Kamholz v. Commissioner, supra, 94 T.C. No. 2

(January 11, 1990). We have no way of determining how many times

the IRS has taken this position because we do not have access to the

unreported cases, such as this case and the first case of the Taxpayer,

where the issue was present.

Although the memorandum of the court of appeals in this case is

unpublished, the Government has it and must receive great comfort

from it, published or not. The harm to taxpayers in general is therefore

great, and the implications of the memorandum should be evaluated as

if it had been published.

24

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

JAMES F. KENNEDY

767 Fifth Avenue

47th Floor

New York, New York 10153

(212) 909-5340

Counsel of Record

GEORGE T. DONOGHUE, JR.

230 W. Monroe Street

Suite 2040

Chicago, Illinois 60606

(312) 236-4711

Attorneys for Petitioner

February 1990

APPENDIX

la

APPENDIX A

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 88-15393

a an

D.C. No. CV-87-5771-MHP

Submitted October 31, 1989!

Filed: November 16, 1989

>

W.C. GARCIA & ASSOC., INC.,

Plaintiff-Appellant,

—vs oo

FRANK S. MICELI, District Director,

Internal Revenue Service,

Defendant-Appellee.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MARILYN H. PATEL, DISTRICT JUDGE, PRESIDING

+

Before:

ALARCON, O’SCANNLAIN, and LEAVY, Circuit Judges.

~

l The panel unanimously finds this case suitable for submission on the

record and briefs and without oral argument. Fed. R. App. P. 34(a), Ninth

Circuit Rule 34-4.

2a

MEMORANDUM?

W.C. Garcia & Associates (‘‘Garcia’’) appeals the district

court’s grant of summary judgment in favor of the IRS. On

appeal, Garcia argues that the court erred by (1) not enjoin-

ing the IRS from collecting a tax deficiency; (2) not ordering

the return of money seized in a prior deficiency action; and

(3) not awarding litigation costs against the government. We

reject these arguments and we affirm.

The district court concluded that Garcia’s action for

injunctive relief in this case was rendered moot by the IRS’s

decision to abate the assessment and to release all liens. We

agree. Although this is the second time the IRS has sought to

collect on this delinquency without the requisite notice of

deficiency to the taxpayer, see 26 U.S.C. § 6213(a), there has

been no showing that the event will likely occur again. See

United States v. W.T. Grant Co., 345 U.S. 629, 633 (1953)

(‘‘The necessary determination is that there exists some cogni-

zable danger of recurrent violation, something more than the

mere possibility which serves to keep the case alive.’’).

Even if the controversy was not moot, we fail to see how

the district court could have afforded Garcia the injunctive

relief it sought. There was no showing in this case of the nec-

essary irreparable injury and the absence of an adequate legal

remedy. See Perlowin v. Sassi, 711 F.2d 910, 912 (9th Cir.

1983); Cool Fuel, Inc. v. Connett, 685 F.2d 309, 313-14 (9th

Cir. 1982). Garcia paid the first assessment and therefore had

an adequate remedy in district court to seek a refund pursu-

ant to 26 U.S.C. § 7422. See Cool Fuel, 685 F.2d at 314. We

agree with the district court that Garcia may not, however,

seek such a refund in this action and thereby avoid the juris-

dictional prerequisites of section 7422(a).

Finally, Garcia contends it should be awarded its reason-

able litigation costs pursuant to 26 U.S.C. § 7430(a). We dis-

agree. Although the IRS admitted that its second assessment

was erroneous, there has been no showing that the govern-

2 ‘This disposition is not appropriate for publication and may not be

cited to or by the courts of this circuit except as provided by Ninth Circuit

Rule 36-3.

3a

ment’s position throughout these proceedings was not sub-

stantially justified. See 26 U.S.C. § 7430(c)(4)(A)(i).

AFFIRMED.

4a

APPENDIX B

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

No. C 87-5771 MHP

-

Filed: July 22, 1988

>

W.C. GARCIA & ASSOCIATES, INC.,

Plaintiff,

—Vvs.—

FRANK S. MICELLI [sic] District Director,

Internal Revenue Service,

Defendant.

>

ORDER

This case was brought to enjoin the defendant from assess-

ing a corporate income tax deficiency and from collecting

money in the value of that assessment plus the interest and

late penalty, and to recover money already collected. The

complaint alleges that defendant levied taxes without provid-

ing a notice of the deficiency in violation of 26 U.S.C.

§ 6212(a). The case is now before the court on cross-motions

for summary judgment. Having considered the submissions

and arguments of the parties, for the following reasons, the

court denies plaintiff's motion and grants defendant's

motion.

Sa

BACKGROUND

In 1984 plaintiff W.C Garcia & Associates, in a similar

action, unsuccessfully sought to enjoin defendant Internal

Revenue Service (‘‘Service’’) from levying corporate income

taxes for the taxable year ending November 30, 1975 by alleg-

ing that the service failed to provide notice of the deficiency

before assessment and collection. In 1987 the Service,

through an error, again proceeded to levy taxes for the tax

period ending November 30, 1975 and, again, failed to pro-

vide plaintiff with a deficiency notice. The Service discovered

the error and cancelled its collection effort.

DISCUSSION

Plaintiff seeks an injunction and refund of money collected

or seized. The complaint alleges that the Service levied

amounts due in taxes without providing the corporation with

a notice of deficiency. A mailed notice of deficiency to the

taxpayer is a prerequisite to assessment and collection. See

United States v. Zolla, 724 F.2d 808, 810 (9th Cir.), cert.

denied, 469 U.S. 830, reh’g denied, 469 U.S. 1067 (1984). At

time of the hearing on this motion, the Assistant United

States Attorney represented that the Service had abated its

assessment and, therefore, the plaintiff's claim was moot.

However, the declaration and supporting Service document

were not totally clear on this point. The court requested a

declaration setting forth the status of the assessment and that

declaration was filed on June 6, 1988. According to the dec-

laration, made by an authorized employee, no further collec-

tion actions will be taken with respect to the 1975 tax year

and all liens filed in connection therewith have been released.

An action for injunctive relief ‘tis moot when the issues

presented are no longer ‘live’ or the parties lack a legally cog-

nizable interest in the outcome.’’ William v. Alioto, 549 F.2d

136, 140-41 (9th Cir. 1977) (quoting Powell v. McCormack,

395 U.S. 486, 496 (1969)). An exception occurs when ‘‘(1) the

challenged action was in its duration too short to be fully liti-

gated prior to its cessation or expiration, and (2) there was a

reasonable expectation that the same complaining party

6a

would be subjected to the same action again.’’ Weinstein v.

Bradford, 423 U.S. 147, 149 (1975).

Plaintiff’s action for injunctive relief is moot. Failure to

provide a deficiency notice in violation of 26 U.S.C.

§ 6212(a) is not a case within a class normally incapable of

appellate review because of the lapse of time. See Alioto, 549

F.2d at 142. There is no evidence that an assessment is likely

to occur again, let alone an assessment in violation of section

6212(a). Failure to provide the requisite notice on two prior

occasions does not create a ‘‘reasonable expectation’’ of a

third transgression.

Plaintiff also seeks the return of all money secured or

seized under the assessment and the payment of reasonable

litigation costs pursuant to 26 U.S.C. § 7430(a). It seeks this

relief as part of the requested injunction. While it is true that

some courts have allowed a return of seized property as part

of the injunctive relief where there has been a failure to give

notice of deficiency, see, e.g., Rambo v. United States, 492

F.2d 1060, 1064 (6th Cir. 1974), cert. denied, 423 U.S. 1091

(1976), that does not relieve plaintiff of making the necessary

showing for an injunction. In this circuit plaintiff must show_

irreparable injury and the absence of an adequate legal rem-

edy. See Perlowin v. Sassi, 711 F.2d 910, 912 (9h Cir. 1983);

Cool Fuel, Inc. v. Connett, 685 F.2d 309, 313-14 (9th Cir.

1982). This court has similarly ruled in an earlier case filed

by plaintiff. See W. C. Garcia & Associates, Inc. v. Sassi,

Civ. No. 84-0224 MHP (Order Denying Preliminary Injunc-

tion filed March 12, 1984). Plaintiff has failed to make this

showing.

Furthermore, plaintiff cannot use these proceedings in lieu

of an action for refund and avoid its jurisdictional prerequi-

sites under 26 U.S.C. § 7422(a). Plaintiff has not brought

this action under section 7422(a) nor has he made the neces-

sary allegations to state a section 7422(a) claim. See Zernial

v. United States, 714 F.2d 431, 434 (Sth Cir. 1983). For the

same reasons articulated in the March 12, 1984 order, this

court finds that plaintiff has failed to show irreparable injury

and absence of an adequate legal remedy. Accordingly, all

injunctive relief is denied, plaintiff's motion for summary

—

7a

judgment is denied, defendant’s motion for summary judg-

ment is granted and this action is dismissed.

IT IS SO ORDERED.

Dated: July 22, 1988

/s/ MARILYN HALL PATEL

Marilyn Hall Patel

United States District Judge