VI Derivatives LLC Ex Rel. VIFX LLC v. United States
671 F. App'x 839
| 3rd Cir. | 2016Background
- In 2001 the Vento family and related entities realized large capital gains; the Ventos filed 2001 returns with the Virgin Islands Bureau of Internal Revenue (VIBIR) claiming USVI residency.
- IRS issued FPAAs to V.I. Derivatives, LLC and VIFX, LLC (the LLCs) and deficiency notices to individual Ventos; parallel territorial notices were issued by VIBIR.
- District Court held a 2011 bench trial and found none of the Ventos were bona fide USVI residents; the territorial cases were dismissed (April 2011 Judgments).
- On appeal this Court (Vento Residency Decision) affirmed as to three daughters but reversed as to Richard and Lana Vento, holding they were USVI residents; the panel noted partnerships’ residencies follow owners.
- After the residency decision became final, the LLCs sought dismissal of the federal proceedings for lack of subject matter jurisdiction; District Court denied, concluding res judicata barred the jurisdictional challenge.
- Third Circuit affirmed, holding the Vento Residency Decision resolved the LLCs’ appeals and constituted a final judgment on the merits, thus precluding late jurisdictional attacks.
Issues
| Issue | Plaintiff's Argument (LLCs) | Defendant's Argument (United States/VIBIR) | Held |
|---|---|---|---|
| Whether LLCs’ late challenge to District Court subject-matter jurisdiction is barred by res judicata | No final judgments exist in LLCs’ cases; jurisdictional challenge can be raised now | Vento Residency Decision produced final judgments on the merits for the consolidated cases, barring belated jurisdictional attacks | Res judicata bars the LLCs’ jurisdictional challenges; affirm denial of dismissal |
| Whether the appellate Vento Residency Decision resolved LLCs’ residency as a matter of law | LLCs contend their cases were not finally resolved and remand was required | Appellate opinion decided owners’ residency and noted partnerships’ residency follows owners; no remand or further district work was indicated | The panel fully resolved residency for the LLCs; only ministerial tax calculations remained |
| Whether subject-matter jurisdiction can be re-litigated after a final merits judgment | Subject-matter jurisdiction can always be raised and cannot be waived | A final merits judgment can have preclusive effect on later jurisdictional challenges (res judicata) | Court applied res judicata to bar post-judgment jurisdictional challenge |
| Effect of ministerial remaining tasks on finality | LLCs argue final judgment was not entered because further proceedings were necessary | Government/ court: remaining tasks were ministerial administrative calculations, not substantive proceedings | Decision is final for preclusion purposes when only ministerial acts remain |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (subject-matter jurisdiction can be raised anytime but is subject to preclusion after a final judgment)
- Hodge v. Hodge, 621 F.2d 590 (3d Cir. 1980) (final judgment on the merits bars later jurisdictional attack under res judicata)
- In re Kaiser Grp. Int’l Inc., 399 F.3d 558 (3d Cir. 2005) (discussing preservation of jurisdictional challenges and finality)
- Vento v. Dir. of V.I. Bureau of Internal Revenue, 715 F.3d 455 (3d Cir. 2013) (appellate decision resolving bona fide residency of Ventos and stating partnerships’ residency follows owners)
- Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193 (3d Cir. 2004) (decision is final when only ministerial tasks remain)
- Brown v. Francis, 75 F.3d 860 (3d Cir. 1996) (plenary review of subject-matter jurisdiction on appeal)