Goodrich v. United States, 3f4th776

Henry Sr. and Tonia Goodrich owned community property including Goodrich Petroleum stock/options; Tonia’s succession (completed 2015) left her share to her children subject to Henry Sr.’s usufruct.
Henry Sr. sold Goodrich securities during his life for $857,914; half ($428,957) was attributable to Plaintiffs as naked owners subject to the usufruct.
Henry Sr. died owing federal income taxes for 2012–2014; his executor opened a succession checking account through which estate funds flowed.
The IRS levied the succession checking account in April–May 2017; the bank remitted $239,927 to the IRS, which applied part to Henry Sr.’s 2012 liability.
Plaintiffs sued under I.R.C. § 7426(a)(1) for wrongful levy, claiming the levied funds included their share of proceeds from the liquidated Goodrich securities; the magistrate judge ordered partial return but held Plaintiffs were not owners of the funds tied to the securities.
The Fifth Circuit concluded Louisiana law lacks a clear answer on whether naked owners of consumables are unsecured creditors and certified two questions to the Louisiana Supreme Court rather than resolving the issue itself.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Plaintiffs (naked owners) hold an ownership interest in funds from liquidated Goodrich securities sufficient under § 7426(a)(1)	Goodrich: Plaintiffs are naked owners entitled to the proceeds, so IRS levy was wrongful	U.S.: Plaintiffs are unsecured creditors of the succession (usufructuary became debtor), so IRS has priority	Court did not decide; certified to Louisiana Supreme Court whether a naked owner of consumables is an unsecured creditor and, if not, the naked owner’s legal relationship to the consumables
Whether lack of the requisite “interest” deprives the federal court of jurisdiction (sovereign immunity/standing)	Goodrich: They possess the requisite interest and thus fall within § 7426 waiver of sovereign immunity	U.S.: If Plaintiffs lack an ownership-equivalent interest, sovereign immunity bars the suit and the federal court lacks subject‑matter jurisdiction	Court treated the interest inquiry as material to the waiver of sovereign immunity and declined to resolve it until Louisiana law is clarified by the state’s high court
Whether to certify unresolved Louisiana-law questions to the Louisiana Supreme Court	Goodrich: State-law question is determinative and unsettled (supporting certification)	U.S.: (No controlling state precedent cited)	Fifth Circuit certified two questions to the Louisiana Supreme Court and transferred the record for authoritative state-law guidance

Oxford Capital Corp. v. United States, 211 F.3d 280 (5th Cir. 2000) (sets elements for a wrongful‑levy claim under § 7426)
Frierdich v. United States, 985 F.2d 379 (7th Cir. 1993) (defines “interest” for § 7426 as fee‑simple/equivalent, possessory, or security interest; excludes unsecured creditors)
Aquilino v. United States, 363 U.S. 509 (1960) (federal tax law applies but state law determines taxpayers’ property interests)
Valley Financial, Inc. v. United States, 629 F.2d 162 (D.C. Cir. 1980) (policy rationale against permitting suits by remotely aggrieved parties)
McGinness v. United States, I.R.S., 90 F.3d 143 (6th Cir. 1996) (standing is prerequisite to § 7426 waiver of sovereign immunity)
Stewart v. Usry, 399 F.2d 50 (5th Cir. 1968) (characterizes usufructuary’s obligation to naked owner as a quasi debtor‑creditor relation)
Succession of Catching, 35 So. 3d 449 (La. App. 2 Cir. 2010) (Louisiana appellate decision treating consumables subject to usufruct as creating a debt owed to naked owner)