574 B.R. 862
Bankr. D. Or.2017Background
- debtor Szanto filed Chapter 11; IRS filed a claim for taxes, interest, and penalties totaling $72,406.54; IRS asserted 2007, 2009, and 2010 tax issues and penalties; Szanto amended to add individual IRS employee defendants and multiple claims including breach of contract, fraud, and malicious prosecution; Szanto alleges 2007 taxes were settled in 2012 but IRS later sought more; court addresses FTCA, §106 of the Bankruptcy Code, and §7433 of the Internal Revenue Code.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the United States should be substituted for the IRS as defendant | Szanto contends the IRS filed the claim and the court should name the IRS. | IRS defendant in error; United States proper defendant for suit against IRS. | Yes; United States substituted as defendant. |
| Whether Szanto's contract claim is cognizable and viable under §106 | Contract implied by Form 870-AD; breach alleged when IRS collected beyond agreed amount. | No binding contract; §7121/7122 procedures required; sovereign immunity and lack of claim state. | Contract claim dismissed with prejudice; §106 waiver does not validate the claim. |
| Whether FTCA and §7433 bar the tort claims or permit them as offsets | FTCA §106 waivers allow tort claims against the United States; §7433 exhaustion requirement overridden. | FTCA exceptions §2680(c) and (h) bar tort claims; §106(b)/(c) control; exhaustion not required outside bankruptcy. | Tort claims barred under FTCA §2680(c)/(h); §106(b) cannot override; §106(c) permits only offset; §7433 claims dismissed for failure to allege cognizable injury. |
| Whether Szanto's refund and injunctive relief requests are jurisdictionally viable | Refund and injunctive relief sought under bankruptcy jurisdiction and 7422/7421. | Refund claims require proper filing under §7422; injunctive relief barred by Anti-Injunction Act. | Refund claim dismissed; injunctive relief dismissed under Anti-Injunction Act. |
| Whether §105 jurisdiction extends to overreach the Bankruptcy Code limitations | Inherent jurisdiction and §105 equitable powers support relief. | §105 power limited by Bankruptcy Code and other statutes. | §105 jurisdiction rejected as beyond bounds of the Bankruptcy Code. |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994) (burden to prove jurisdiction; lack of jurisdiction is fundamental)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must show plausible claim; not just conclusory allegations)
- In re Pinkstaff, 974 F.2d 113 (9th Cir. 1992) (compulsory counterclaims under §106 arise from the same transaction)
- McGuire v. United States, 550 F.3d 903 (9th Cir. 2008) (Tucker Act/sovereign immunity; bankruptcy context distinctions)
- Franklin Sav. Corp. v. United States, 385 F.3d 1279 (10th Cir. 2004) (FTCA and §106 interplay; limitations do not beget tolling in bankruptcy claims)
- Spawr v. United States, 796 F.2d 279 (9th Cir. 1986) (control on when counterclaims under FTCA permitted based on principal action sounding in tort)
- In re Ashbrook, 917 F.2d 918 (6th Cir. 1990) (exhaustion of remedies not required where §106 waives FTCA exhaustion)