United States v. Bond
762 F.3d 255
2d Cir.2014Background
- Bankruptcy plan assigned all tax refund claims to a liquidating trust, led by the Liquidating Trustee.
- The Liquidating Trustee filed a federal income tax refund claim in bankruptcy court for the Short Period taxes.
- IRS asserted (i) lack of jurisdiction under sovereign immunity and (ii) potential setoff against other PT-1 tax liabilities.
- Bankruptcy court awarded $3.8 million refund and enjoined setoff rights; district court affirmed but vacated setoff extinguishment.
- Liquidating Trustee and government appealed; government later withdrew its appeal; dispute shifted to setoff and jurisdiction questions.
- Court holds the bankruptcy court lacked jurisdiction because the Liquidating Trustee is not a trustee and exhaustion requirement in 505(a)(2)(B) is not satisfied after plan confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §505(a)(2)(B) exhaustion is satisfied post-confirmation | Bond | Bond | No; Liquidating Trustee is not a trustee; exhaustion not satisfied |
| Whether a plan-assigned liquidating trustee can invoke §505 jurisdiction | Liquidating Trustee may pursue; plan permits assignment | Only a debtor or trustee may initiate | No jurisdiction; §505 requires a trustee filing with IRS |
| Whether government withdrawal of appeal waives jurisdictional defenses | N/A | Withdrawal does not waive jurisdiction | Jurisdictional defense preserved; withdrawal not a waiver |
Key Cases Cited
- Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000) (statutory interpretation; breadth of jurisdiction)
- United States v. Bond, 486 B.R. 9 (2012) (district court on jurisdiction and plan provisions)
- In re Resorts Int’l, Inc., 372 F.3d 154 (3d Cir.2004) (can't expand jurisdiction beyond statute)
- Robinson v. Shell Oil Co., 519 U.S. 337 (1997) (statutory construction; textual clarity governs)
- Starzynski v. Sequoia Forest Industries, 72 F.3d 816 (10th Cir.1995) (plan-appointed estate representative authority)
- IRS v. Luongo, 259 F.3d 323 (5th Cir.2001) (expedited refund procedure for trustees)