Courtney v. United States ( 2022 )


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  • Case: 22-60131     Document: 00516461225         Page: 1     Date Filed: 09/06/2022
    United States Court of Appeals
    for the Fifth Circuit                        United States Court of Appeals
    Fifth Circuit
    FILED
    September 6, 2022
    No. 22-60131
    Lyle W. Cayce
    Summary Calendar
    Clerk
    Gregory Courtney,
    Plaintiff—Appellant,
    versus
    United States of America,
    Defendant—Appellee.
    Appeal from the United States District Court
    for the Southern District of Mississippi
    USDC No. 3:21-CV-589
    Before Stewart, Duncan, Wilson, Circuit Judges.
    Per Curiam:*
    In this appeal arising from a taxpayer liability dispute, Gregory
    Courtney (“Courtney”) appeals the district court’s order granting the
    Government’s motions to dismiss. Because we hold that the district court
    *
    Pursuant to 5th Circuit Rule 47.5, the court has determined that this
    opinion should not be published and is not precedent except under the limited
    circumstances set forth in 5th Circuit Rule 47.5.4.
    Case: 22-60131             Document: 00516461225              Page: 2       Date Filed: 09/06/2022
    No. 22-60131
    lacked subject matter jurisdiction over this matter and the Anti-Injunction
    Act (“AIA”) 1 prevents equitable relief, we affirm.
    I.    Background
    From 2000 to 2004, Courtney was an engineer for Shell Deepwater
    Development, Inc. (“Shell”). At Shell, he was responsible for approving
    expenses related to offshore oil well services. On or around April of 2000,
    Courtney took control of Mercury Equipment and Services Inc. (“MES”).
    MES was an oil field related company that contracted with Shell. Courtney
    began using the MES account to pay his personal expenses and then directed
    Shell to reimburse MES for those payments, under the guise of Shell’s
    payment for MES’s services. In sum, Courtney misappropriated at least $1.3
    million from Shell between 2000 to 2004. Moreover, he failed to report any
    of these payments as income when filing taxes in 2001, 2002, and 2003.
    The Government indicted Courtney in 2008 for one count of income
    tax evasion for the 2001 tax year and one count of mail fraud for a fraudulent
    invoice that he submitted to Shell in 2004.2 Courtney pled guilty to both
    counts. And in 2009, the court sentenced him to pay roughly $1.8 million of
    restitution. The IRS was entitled to approximately $500,000 of the $1.8
    million restitution award and the remaining $1.3 million was allocated to
    Shell. The district court ordered Courtney to pay restitution at a rate of
    $1,000 per month, subject to increases or decreases depending on his ability
    to pay. The order also provided that each non-federal recipient would be paid
    restitution first. Consequently, the IRS’s 2012 Notice of Deficiency
    1
    Prohibition of Suits to Restrain Assessment or Collection, 
    26 U.S.C. § 7421
     et seq.
    (2018).
    2
    The original indictment consisted of three counts of income tax evasion in
    violation of 
    26 U.S.C. § 7201
    . However, a superseding indictment dropped two of the
    income tax evasion counts and added the mail fraud count.
    2
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    informed Courtney that all restitution payments were being allocated to Shell
    and not the IRS. After appealing the Notice of Deficiency, Courtney was left
    with a total of over $1.4 million owed to the IRS for the 2001 tax year and
    about $800,000 for subsequent years that he failed to pay income taxes.
    The IRS has taken multiple measures in attempting to collect
    restitution from Courtney. These measures include a 2009 levy on
    Courtney’s personal individual retirement account, a notice of a federal tax
    lien on all real property and other assets, and an attempt to seize assets from
    an irrevocable trust which benefits his wife and children. Additionally, the
    IRS pursued collections against two limited liability companies that were
    affiliated with Courtney—LLOG Program 2007-2008, L.L.C. (“LLOG”)
    and Oil & Gas Consultants E & P, L.L.C. (“OGC”). The IRS issued a Notice
    of Intent to Levy to LLOG, and successfully levied over $50,000 from the
    business checking account of OGC.
    In September 2021, Courtney filed suit against the Government in the
    federal district court for the Southern District of Mississippi. Courtney
    pursued three forms of relief. First, he sought damages for the collection
    actions filed again him. Second, he sought an accounting of all funds that the
    IRS collected from him and how they were applied. And third, he sought an
    injunction barring further collection actions against him and preventing the
    IRS’s continued collection efforts against LLOG, OGC, and the irrevocable
    trust.
    The Government moved to dismiss Courtney’s complaint, pursuant
    to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), countering with its
    own three claims regarding damages. First, it contended that Courtney failed
    to exhaust administrative remedies prior to filing his complaint. Second, that
    Courtney failed to identify any relevant law that the Government violated.
    And third, that Courtney lacked standing to challenge the levies listed in his
    3
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    complaint. It then argued that Courtney’s request for injunctive relief could
    not be maintained under the AIA because he sought only to restrain the
    collection of a federal tax.
    Courtney contended that he should be excused from the exhaustion
    requirement on futility grounds due to the lack of communicativeness by the
    IRS prior to his filing his complaint. As to the injunction issue, Courtney
    claimed that he fell within the narrow exception recognized in Enochs v.
    Williams Packing, 
    370 U.S. 1
     (1962) because he was certain the Government
    stood no chance of success on the merits and equitable jurisdiction otherwise
    existed.
    The district court granted both of the Government’s motions on
    grounds that it lacked subject matter jurisdiction over the dispute because
    Courtney failed to exercise his administrative remedies. The district court
    further noted that Courtney’s futility grounds were not an adequate excuse
    for circumventing exhaustion. The district court then rejected Courtney’s
    request for an injunction because the AIA barred it and he did not qualify for
    the Williams Packing exception.
    On appeal, Courtney argues that the district court erred in
    determining it lacked subject matter jurisdiction over his damages claim and
    in holding that his injunction request was barred by the AIA. We disagree.
    II.   Standard of Review
    We review a district court’s motion to dismiss for lack of subject
    matter jurisdiction de novo. T. B. by & through Bell v. Nw. Indep. Sch. Dist.,
    
    980 F.3d 1047
    , 1050 (5th Cir. 2020). “We take the well-pled factual
    allegations of the complaint as true and view them in the light most favorable
    to the plaintiff.” 
    Id.
     (quoting Lane v. Haliburton, 
    529 F.3d 548
     (5th Cir.
    2008)).
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    We review a district court’s order granting a motion to dismiss for
    failure to state a claim de novo. Calogero v. Shows, Cali & Walsh, L.L.P., 
    970 F.3d 576
    , 580 (5th Cir. 2020). “We accept all well-ple[d] facts in the
    complaint as true and view the facts in the light most favorable to the
    plaintiff.” O’Daniel v. Indus. Serv. Sols., 
    922 F.3d 299
    , 304 (5th Cir. 2019).
    “However, those facts, taken as true, [must] state a claim that is plausible on
    its face.” 
    Id.
     (quoting Bowlby v. City of Aberdeen, Miss., 
    681 F.3d 215
    , 219 (5th
    Cir. 2012)). “A claim has facial plausibility when the plaintiff pleads factual
    content that allows the court to draw the reasonable inference that the
    defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 
    556 U.S. 662
    (2009).
    III.     Discussion
    A. Subject Matter Jurisdiction
    Section 7433(a) of the Internal Revenue Code provides that:
    If, in connection with any collection of Federal tax
    with respect to a taxpayer, any officer or employee of
    the Internal Revenue Service recklessly or
    intentionally, or by reason of negligence, disregards
    any provision of this title, or any regulation
    promulgated under this title, such taxpayer may bring
    a civil action for damages against the United States in
    a district court of the United States.
    See 
    26 U.S.C. § 7433
    (a). This provision operates as a Congressional waiver
    of sovereign immunity for taxpayers seeking damages against the IRS.
    However, this section provides that “a judgment for damages shall not be
    awarded. . . unless the court determines that the plaintiff has exhausted the
    administrative     remedies        available.”     
    26 U.S.C. § 7433
    (d).     
    26 C.F.R. § 301.7433
     stipulates the requirements to successfully exhaust
    administrative remedies. See Glass v. United States, 71 F. App’x 442, 442 (5th
    5
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    Cir. 2003) (noting that plaintiffs must “file an administrative claim and wait
    six months before bringing an action in district court. The claim must be in
    writing and signed by the taxpayer or his authorized representative and must
    state: the taxpayer’s name and address; the grounds for the claim; a
    description of injuries; and the dollar amount of the claim”).
    We must dismiss suits on jurisdictional grounds if a taxpayer fails to
    comply with these “specific and straightforward instructions.” Lapaglia v.
    Richardson, 
    68 F.3d 466
    , 466 (5th Cir. 1995); see also Glass, 71 F. App’x at 442
    (holding that “when a plaintiff suing the United States has failed to satisfy
    the terms of a waiver provision, the court lacks jurisdiction”).
    Plaintiffs may survive a failure to exhaust administrative remedies
    “only in extraordinary circumstances.” Info. Res., Inc. v. United States, 
    950 F.2d 1122
    , 1127 (5th Cir. 1992). Such circumstances can arise when
    administrative exhaustion would be futile. 
    Id.
     at 1126–27. However, this court
    has held that discretion to circumvent exhaustion “is severely limited” when
    exhaustion is a statutory requirement of relief. 
    Id. at 1126
    . We have also held
    that an agency should generally be afforded the opportunity to “correct its
    own errors.” Power Plant Div., Brown & Root, Inc. v. Occupational Safety &
    Health Rev. Comm’n, 
    673 F.2d 111
    , 114 (5th Cir. 1982). Consequently, where
    an agency is “empowered to accept” a plaintiff’s claim, “probable futility”
    is an inadequate ground for circumventing exhaustion requirements. 
    Id.
     at
    114–15.3
    First, we address Courtney’s claim that the district court erred in
    declaring it lacked subject matter jurisdiction because he failed to exhaust all
    administrative remedies. While Courtney concedes that he failed to file an
    3
    See Power Plant, 
    673 F.2d at 115
     (Noting that “where the [agency] would be
    without power or authority to act. . . an extraordinary circumstance might exist.”).
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    administrative claim in accordance with the requirements set forth in 
    26 C.F.R. § 301.7433
    –1(e), he contends that this was excusable because the
    Government effectively foreclosed his access to administrative remedies by
    continuously refusing to work with him. Otherwise put, Courtney claims the
    Government rendered his efforts futile.
    Both parties primarily rely on Information Resources, Inc. v. United
    States in arguing futility. 
    950 F.2d 1122
    . There, Information Resources sued
    the Government to recover damages for allegedly erroneously filing tax liens
    and for failure to issue timely release of those liens. Info. Res., 
    950 F.2d at 1122
    . The court noted that “the administrative procedure. . . is normally
    adequate,” but the IRS was wholly responsible for its inadequacy by placing
    the liens on Information Resources, only to remove them before it could bring
    a claim. 
    Id. at 1126
    . Moreover, Information Resources went as far as reaching
    out to the IRS “in an attempt to ascertain the proper procedures to follow.”
    
    Id.
     The court reasoned that Information Resource’s intentional outreach
    demonstrated a good faith effort to comply with the administrative
    procedural requirements. Ultimately, the court held that “[r]equiring
    Information Resources to exhaust the administrative procedures would be a
    useless formality” because the only remedy that the IRS could provide was
    release of the liens, which it had already done. 
    Id.
     Thus, the remaining
    remedy for Information Resources was the right to file suit for damages
    against the IRS. 
    Id.
    Here, the evidence demonstrates that Courtney cannot maintain a
    futility argument to evade 
    26 U.S.C. § 7433
    (a)’s procedural requirements.
    Courtney contends that the IRS has been unresponsive, difficult to work
    with, and disingenuous of previous arrangements agreed upon by the parties.
    While all of this may be true, it carries no legal significance as to whether he
    must exhaust his administrative remedies in accordance with statutory law.
    As Information Resources, Inc. v. United States demonstrates, Courtney only
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    succeeds on his futility argument if he can prove that the IRS’s conduct
    rendered his administrative remedies a “useless formality.” 
    Id. at 1126
    .
    Nothing in the record suggests that the Government has stopped attempts to
    seize funds from the irrevocable trust fund, removed any liens from
    Courtney’s real or personal property, or forgiven any of the tax debt that he
    owes to the IRS. Moreover, Courtney has failed to make any good faith efforts
    to comply with § 7433(a)’s procedures—ignoring its clear procedural
    mandates and instead prompting the exact type of litigation the provision
    contemplates avoiding. To be clear, the procedural requirements here are not
    useless because there are remedies the IRS can provide if Courtney files an
    administrative claim. Because the Government has not rendered Courtney’s
    administrative remedies futile, we affirm the district court’s holding that it
    lacked jurisdiction over his claims for damages under § 7433(a).
    B. Injunctive Relief
    We now turn to whether the AIA bars Courtney’s claim for injunctive
    relief. We conclude that it does. The AIA provides that “no suit for the
    purpose of restraining the assessment or collection of any tax shall be
    maintained in any court by any person, whether or not such person is the
    person against whom such tax was assessed.” 
    26 U.S.C. § 7421
    . The
    Supreme Court has interpreted this provision to protect the Government’s
    “need to assess and collect taxes as expeditiously as possible with a minimum
    of preenforcement judicial interference, and to require that the legal right to
    the disputed sums be determined in a suit for refund.” Bob Jones Univ. v.
    Simon, 
    416 U.S. 725
    , 736 (1974) (internal citation and quotations omitted).
    “In considering a suit’s purpose, we inquire not into a taxpayer’s subjective
    motive, but into the action’s objective aim—essentially, the relief the suit
    requests.” CIC Servs., L.L.C. v. Internal Revenue Serv., 
    141 S. Ct. 1582
    , 1589
    (2021).
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    In Enochs v. Williams Packing, the Supreme Court carved out a narrow
    exception to the AIA, which applies only if “(1) it is clear that under no
    circumstances could the Government ultimately prevail. . . [and] (2) equity
    jurisdiction otherwise exists.” 
    370 U.S. at 7
    . The first prong requires that the
    plaintiff have a “certainty of success on the merits.” Bob Jones Univ., 
    416 U.S. at 737
    . Additionally, our evaluation at the first stage requires that we
    provide the “most liberal view of the law and the facts” to the Government.
    Williams Packing, 
    370 U.S. at 7
    . The second prong requires the plaintiff to
    prove that equity jurisdiction exists. To do so, a plaintiff must show that
    irreparable harm will occur absent an injunction, “that is, harm for which
    there is no adequate remedy at law.” Daniels Health Scis., L.L.C. v. Vascular
    Health Scis., L.L.C., 
    710 F.3d 579
    , 585 (5th Cir. 2013).
    Preliminarily, we must evaluate whether the Government is correct in
    asserting that Courtney’s request for an injunction falls within the purview
    of the AIA. We hold that it is. Objectively, Courtney’s suit requests
    prevention of the collection of taxes by the Government. See CIC Servs., 141
    S. Ct. at 1589. Regardless of how temporary Courtney’s request is, the nature
    of it is expressly contemplated and barred by the AIA. See 
    26 U.S.C. § 7421
    (a). Since Courtney cannot avoid the AIA, he must prove that his
    request fits within the narrow Williams Packing exception.
    On appeal, Courtney argues that he satisfies the first prong because he
    has pled that the IRS improperly levied funds from his company, retirement
    plan, and continues to seek information and seize assets from an irrevocable
    trust created for his family. Moreover, he argues that he satisfies this prong
    by the very fact that he has made these allegations and because the IRS has
    failed to refute the allegations. He relies on C.I.R. v. Shapiro, to assert that
    the Government bears the burden of proving that the allegations in his
    complaint are wrong. 
    424 U.S. 614
    .
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    In that case, the IRS asserted that Shapiro earned substantial
    unreported income and seized his assets because he was scheduled for
    imminent extradition to Israel. 
    Id.
     He sought to enjoin the Government’s
    seizure, relying on the Williams Packing exception. He argued that he did not
    actually owe any taxes, thus was certain to succeed on the merits, and that he
    was entitled to equitable jurisdiction because he needed the seized funds to
    make bail in Israel. Shapiro submitted discovery requests to discern the basis
    for the IRS’s claim that he owed additional taxes. 
    Id. at 620
    . In response, the
    Government provided a notice of deficiency explaining that the additional
    taxes owed stemmed from Shapiro’s alleged narcotics transactions. 
    Id. at 621
    .
    The Government declined to cooperate with any other discovery requests,
    declaring them premature. 
    Id.
     Ultimately, the Supreme Court held that
    taxpayers must know the basis for the IRS’s assessment of taxes in order for
    district and appellate courts to properly evaluate whether the plaintiff can
    show “that the Government will certainly be unable to prevail.” 
    Id.
     at 626–
    27. Accordingly, while the taxpayer still bears the “ultimate burden” of
    persuading the district court that “the Government will under no
    circumstances prevail,” the Government necessarily has “some obligation to
    disclose the factual basis for its assessments,” so that the taxpayer may
    properly make its case. 
    Id.
     at 626–28.
    Here, both parties stipulate that the Government must prove LLOG,
    OGC, or the irrevocable trust have a sufficient relationship to Courtney for
    the Government to lawfully collect funds from these entities. Moreover, both
    parties stipulate that this is a fact-intensive inquiry that requires an analysis
    of the relationship between Courtney and each entity. However, Courtney
    misapplies Shapiro in arguing that the Government must prove that it legally
    sought collection from LLOG, OGC, or the irrevocable trust. Such would be
    the case if the Government was in sole possession of the information
    pertaining to the relationship between Courtney and the entities, but it is not.
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    On the contrary, Courtney is in sole possession of the information detailing
    the relationship of these businesses and the irrevocable trust. Moreover, he
    has not submitted any discovery requests and the Government has not
    obstructed his ability to prove that LLOG, OGC, or the irrevocable trust are
    not connected to him.
    On this record, Courtney has failed to plead enough facts to prove
    with certainty that the Government will be unable to prevail under any
    circumstance, so he does not qualify for the Williams Packing exception.
    Williams Packing, 
    370 U.S. at 7
    . Furthermore, our analysis of the second
    prong is unnecessary because relief may only be granted upon satisfying both
    requirements. 
    Id.
    The district court properly dismissed Courtney’s claim for lack of
    subject matter jurisdiction. T. B. by & through Bell, 980 F.3d at 1050. It also
    properly barred his injunction request in accordance with the AIA. Calogero,
    970 F.3d at 580.
    IV.    Conclusion
    For the foregoing reasons, we AFFIRM the district court’s judgment
    in full.
    11