Mottahedeh v. United States
794 F.3d 347
| 2d Cir. | 2015Background
- Trust created by Parviz Lavi in 1993; Angela Mottahedeh is trustee and received 19 shares of Old Cedar stock in 1998.
- IRS had outstanding tax assessments against Lavi (late 1970s–1980s); various liens and notices followed, including a 2003 federal tax lien.
- February 11, 2009: IRS served a notice of levy/seizure on Mottahedeh concerning the Old Cedar stock (alleged 1978 tax). Mottahedeh sued under 26 U.S.C. § 7426 in Aug. 2009 and voluntarily dismissed after denial of a preliminary injunction.
- October 2009: IRS served a new notice of levy/seizure tied to a 1979–1980 tax court judgment; IRS took possession and threatened a sale, but no sale occurred. Mottahedeh paid under protest July 28, 2010.
- July 23, 2012: Mottahedeh filed a § 7426 wrongful-levy claim seeking about $2.9M. Government moved to dismiss as time-barred under 26 U.S.C. § 6532(c) (9-month limit). District court dismissed for lack of jurisdiction and denied leave to amend to add a § 1346 refund claim.
- Second Circuit affirmed: Mottahedeh’s § 7426 claim was untimely, a levy occurred upon service of the notice, equitable tolling did not apply, and a § 1346 refund claim was barred where a timely § 7426 remedy was available but not pursued.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mottahedeh’s July 2012 § 7426 suit is time‑barred under 26 U.S.C. § 6532(c) | Prior timely § 7426 suit (Feb. 2009 levy) satisfied limitations, making later suit timely | § 6532(c) starts from the levy giving rise to each action; Oct. 2009 levy started a new 9‑month period, and July 2012 suit was too late | Held: Time‑barred; prior suit for Feb. 2009 levy does not toll or satisfy limitations for the Oct. 2009 levy |
| Whether a "levy" occurred (so the 9‑month clock started) even though the property was never sold | No sale occurred, so no levy triggered § 6532(c) limitations | Service of notice of levy on the property possessor constitutes a levy for § 6532(c) purposes | Held: A levy occurred upon service of the notice; sale not required to trigger § 6532(c) |
| Whether equitable tolling should apply to excuse late filing | Uncertainty about the amount owed (different liens/notices) and prior processes justify tolling | No extraordinary circumstance prevented timely filing; plaintiff failed to pursue remedies diligently | Held: Equitable tolling not available; plaintiff did not plead diligent pursuit or extraordinary circumstances |
| Whether district court should have allowed amendment to add a § 1346 refund claim | If § 7426 is barred, leave to amend to bring a refund claim under § 1346 should be granted | EC Term and subsequent precedent bar § 1346 claims where a § 7426 remedy was available (even if now time‑barred) | Held: Denial of leave to amend was not an abuse of discretion; § 1346 claim unavailable where a § 7426 remedy existed but deadline was missed |
Key Cases Cited
- Williams v. United States, 947 F.2d 37 (2d Cir.) (service of notice of levy on possessor triggers § 6532(c) limitations)
- EC Term of Years Trust v. United States, 550 U.S. 429 (2007) (clarifies limits on bringing § 1346 refund claims where § 7426 remedies were available)
- United States v. Williams, 514 U.S. 527 (1995) (authorized § 1346 refund suit by payer under protest when no other remedy existed)
- Pace v. DiGuglielmo, 544 U.S. 408 (2005) (standards for equitable tolling: diligence and extraordinary circumstances)
- A.Q.C. ex rel. Castillo v. United States, 656 F.3d 135 (2d Cir.) (discusses equitable tolling standards in Second Circuit)
- Mackensworth v. S.S. Am. Merch., 28 F.3d 246 (2d Cir.) (standard for de novo review of jurisdictional dismissals)
- Panther Partners Inc. v. Ikanos Commc’ns, Inc., 681 F.3d 114 (2d Cir.) (standard of review for denial of leave to amend based on futility)