Case Information
*1 FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT (cid:252) V ERA OF A MERICA , I NC ., a
Texas corporation; R EX G.
M AUGHAN , husband; R UTH G.
M AUGHAN , wife; M AUGHAN
H OLDINGS I NC ., an Arizona
corporation,
Plaintiffs-Appellants, and G ENE Y AMAGATA ; Y AMAGATA
H OLDINGS , I NC .,
Plaintiffs, No. 07-15577
B UREAU OF N ATIONAL A FFAIRS , I NC ., (cid:253) Intervenor, D.C. No. CV-99-01794-JAT v.
U TATES OF ,
Defendant-Appellee, v.
K IICHIRO H ARANO , J UNICHI
H AYAKAWA ; Y OSHINORI H ORIKAWA ; T HE Y OMIURI S HIMBUN ; H ITOSHI U CHIYAMA ; T SUENEO W ATANABE T OYOHIKO Y AMANOUCHI (Non-party Witness,) (cid:254) Movant.
A LOE V A MERICA NITED S (cid:252) A LOE ERA OF A MERICA , I NC ., a Texas corporation; R EX G.
M AUGHAN , husband; R UTH G.
M AUGHAN , wife; M AUGHAN
H OLDINGS I NC ., an Arizona
corporation,
Plaintiffs,
B UREAU OF N ATIONAL A FFAIRS , I NC .,
Intervenor, and G ENE Y AMAGATA ; Y AMAGATA No. 07-15579 H OLDINGS , I NC ., (cid:253) D.C. No. Plaintiffs-Appellants, CV-99-01794-JAT v. OPINION U TATES OF ,
Defendant-Appellee, v.
K IICHIRO H ARANO , J UNICHI
H AYAKAWA ; Y OSHINORI H ORIKAWA ; T HE Y OMIURI S HIMBUN ; H ITOSHI U CHIYAMA ; T SUENEO W ATANABE T OYOHIKO Y AMANOUCHI (Non-party Witness,) (cid:254) Movant.
Appeals from the United States District Court for the District of Arizona James A. Teilborg, District Judge, Presiding
Argued and Submitted
October 24, 2008—San Francisco, California
Filed July 30, 2009
Before: J. Clifford Wallace, Sidney R. Thomas and Susan P. Graber, Circuit Judges.
Opinion by Judge Wallace COUNSEL Terrence D. Woolston and Tim A. Tarter, Woolston & Tarter, P.C., Phoenix, Arizona, and Edwin B. Wainscott and James A. Ryan, Quarles & Brady, L.L.P., Phoenix, Arizona, for plaintiffs-appellants Aloe Vera of America, Inc., Rex G. Maughan, Ruth G. Maughan and Maughan Holdings, Inc. Merwin D. Grant and Kenneth B. Vaughn, Grant & Vaughn, P.C., Phoenix, Arizona, for plaintiffs-appellants Gene Yama- gata and Yamagata Holdings, Inc.
Richard T. Morrison, Acting Assistant Attorney General, Jon- athan S. Cohen and Karen G. Gregory, Tax Division, Depart- ment of Justice, Washington, D.C., for the defendant- appellee.
OPINION WALLACE, Senior Circuit Judge:
Aloe Vera of America, Inc., Rex Maughan, Ruth Maughan, Maughan Holdings, Inc., Gene Yamagata, and Yamagata Holdings, Inc. (collectively, Aloe Vera), appeal from the dis- trict court’s summary judgment against them on their claims under 26 U.S.C. § 7431(a)(1). We must determine whether the statute of limitations in 26 U.S.C. § 7431(d) is jurisdic- tional. We vacate and remand.
I.
Rex Maughan (Maughan) is the owner of Aloe Vera of America, Inc. (AVA), a United States corporation that pro- cesses and sells aloe vera products in the United States, Japan, and other countries. Maughan and Yamagata, indirectly through their respective holding companies, are co-owners of Forever Living Products Japan, Inc. (FLPJ), a Japanese corpo- ration that purchases products from AVA.
In 1991 and 1992, AVA paid commissions and royalty- based income received from FLPJ to Maughan and Yamagata. The Internal Revenue Service (IRS) was concerned about whether this income was properly reported in the United States. Consequently, on April 26, 1996, the IRS sent a letter to the Japanese National Taxing Authority (NTA), proposing that the authorities simultaneously examine the tax reports of AVA, Maughan, Yamagata, and FLPJ. The letter estimated that for tax years 1991 and 1992, Maughan and Yamagata failed to report commission and royalty income from AVA product sales to FLPJ, totaling more than $32 million. In August 1996, the IRS and NTA held a meeting to discuss the examination. During this time, Aloe Vera apparently did not know about the examination and did not know that the NTA and IRS were disclosing information to each other.
On August 15, 1996, the IRS notified Maughan and AVA of the simultaneous examination. This appears to be the first notification that Maughan and AVA had of the investigation. At the end of 1996, the NTA made an audit proposal to FLPJ, which FLPJ rejected, and in early 1997, the NTA sent correc- tion notices to FLPJ regarding its tax liabilities. In February 1997, the IRS sent letters to Maughan and AVA to propose tax adjustments. Shortly thereafter, on March 4, 1997, Maug- han and AVA took the offensive and filed requests pursuant to the Freedom of Information Act for copies of documents exchanged by the NTA and the IRS during the simultaneous examination.
On October 9, 1997, Japanese news sources reported that Aloe Vera had failed to report income of 7.7 million yen (at the time, approximately $60 million) to tax authorities. The Japanese reporters attributed this information to unidentified “tax sources” and the IRS. After the news of the simultaneous examination leaked, Aloe Vera lodged a complaint with the United States Competent Authority, accusing the NTA of intentionally disclosing tax information to the public. After an investigation, the Competent Authority found no proof that the NTA had leaked the information.
On October 6, 1999, Aloe Vera filed a complaint against the United States government in the district court under 26 U.S.C. § 7431(a), containing two counts. In Count I, Aloe Vera alleged that the IRS had disclosed false information to the NTA in violation of 26 U.S.C. § 6103(a). In Count II, Aloe Vera alleged that the IRS had further violated section 6103 by disclosing certain tax information to the NTA even though the IRS knew or should have known that the NTA would leak the information.
The government moved to dismiss the complaint on several grounds, including that the complaint was barred on jurisdic- tional grounds by the two-year statute of limitations contained in section 7431(d). The district court held that the statute of limitations in that section was not jurisdictional, but neverthe- less dismissed the complaint (with leave to amend) because Aloe Vera had failed to plead a date of discovery of the alleg- edly unauthorized disclosures within the two-year limitations period. After Aloe Vera filed an amended complaint, the court refused to dismiss the action as untimely because the amended complaint included an allegation that Aloe Vera did not discover the nature of the IRS disclosures to the NTA until August 1998, when Aloe Vera received disclosures under the Freedom of Information Act pursuant to a court order.
Subsequently, the government moved for summary judg- ment on both counts, and Aloe Vera moved for summary judgment on Count I. The district court granted the govern- ment’s motion on both counts. As to Count I, the district court held that the government’s disclosure of allegedly false infor- mation to the NTA did not violate section 6103(a). As to Count II, the district court held that Aloe Vera had not raised a genuine issue of material fact as to whether the IRS knew or should have known, prior to October 1997, that the NTA routinely leaked information received under the treaty. Aloe Vera timely appealed, challenging the district court’s sum- mary judgment on both counts.
We review de novo both the district court’s summary judg- ment and its interpretation of the Internal Revenue Code. Sid- diqui v. United States , 359 F.3d 1200, 1202 n.2 (9th Cir. 2004). We review de novo the district court’s denial of a motion to dismiss. Silvers v. Sony Pictures Entm’t, Inc. , 402 F.3d 881, 883 (9th Cir. 2005) (en banc).
II.
[1] Aloe Vera sued the government under 26 U.S.C. § 7431(a)(1), which allows a taxpayer to bring a civil action for damages against the government when an officer or employee of the government “knowingly, or by reason of neg- ligence, inspects or discloses any return or return information with respect to a taxpayer” in violation of section 6103. Sec- tion 7431(d) provides that any claim for wrongful disclosure of tax return information “may be brought . . . at any time within 2 years after the date of discovery by the plaintiff of the unauthorized inspection or disclosure.”
The Supreme Court recently explained that when the
United States is named as a defendant in an action, a statute
of limitations, such as the one in section 7431(d), falls into
one of two categories.
See John R. Sand & Gravel Co. v.
United States
,
Because jurisdictional questions must be decided prior to
reaching the merits of a case, we must first determine whether
the limitations period provided in section 7431(d) falls into
this latter category of jurisdictional statutes of limitations.
Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp
., 549 U.S.
422, 430-31 (2007);
see also Hansen v. Dep’t of Treasury
,
528 F.3d 597, 600 (9th Cir. 2007) (holding that an appellate
court “has a special obligation to satisfy itself not only of its
own jurisdiction, but also that of the lower courts in a cause
under review” (internal quotation marks omitted)). Reviewing
this issue
de novo
,
United States v. Park Place Assocs., Ltd
.,
Congress intended the statute of limitations to be absolute. The inclusion of the phrase “[n]otwithstanding any other pro- vision of law” at the beginning of the subsection requires that an action may be brought only within the two-year period. No provision of law may abrogate that prescription, including any provision that may provide for equitable tolling or waiver. By including this phrase, Congress clearly signaled that the stat- ute of limitations is absolute.
Nevertheless, Aloe Vera argues that our decision in
Cedars-Sinai Medical Center v. Shalala
, 125 F.3d 765 (9th
Cir. 1997) compels a different result. To the extent that
Cedars-Sinai
is still valid after
John R. Sand
,
see Marley v.
United States
, 567 F.3d 1030, 1036 n.3 (9th Cir. 2009), the
holding in
Cedars-Sinai
does not dictate the jurisdictional
nature of section 7431(d). In
Cedars-Sinai
, we held that the
statute of limitations in 28 U.S.C. § 2401(a) was not jurisdic-
tional.
[5]
For these reasons, we conclude, as the Fifth Circuit has
in
Gandy v. United States
,
III. We next turn to the question of whether Aloe Vera
timely filed its action. Section 7431(d) provides that an action
must be brought within two years of the “date of discovery by
the plaintiff of the unauthorized inspection or disclosure.” 26
U.S.C. § 7431(d). Although the statute could be clearer, we
hold that the statute begins to run on the date on which a
plaintiff discovers that the allegedly unauthorized inspection
or disclosure has taken place, regardless of whether the plain-
tiff believed at that time that the inspection or disclosure was
authorized. We conclude that “unauthorized” merely modifies
“inspection or disclosure.” So construed, an action pursuant to
section 7431(d) must be filed within two years of the date of
discovery of the supposedly improper disclosure, not the date
when the plaintiff realizes that a disclosure was unauthorized.
Cf. United States v. Kubrick
,
In this case, the district court ruled that the complaint was timely filed based on allegations in the amended complaint that Aloe Vera “did not discover the unauthorized disclosures by the IRS until August 7, 1998 . . . as a result of a disclosure order . . . in a Freedom of Information Act suit.” The court then held that the complaint, which was filed on October 6, 1999, had been timely filed.
The district court did not make findings of fact as to
whether Aloe Vera knew, more than two years before it filed
the complaint, that the IRS had disclosed information to the
NTA. Nor did it make findings of fact as to when Aloe Vera
discovered the specific disclosures it now claims were false.
Rather, the district court relied exclusively on the amended
complaint’s allegation that Aloe Vera did not discover that the
disclosures by the IRS were unauthorized until August 1998.
But the determination of jurisdiction requires more. As
described above, the proper date from which to measure the
timeliness of the complaint under section 7431 is the date
when Aloe Vera discovered the respective disclosures, not the
date when Aloe Vera discovered that the disclosures were
unauthorized. The pleadings alone are inadequate to make this
determination. We therefore vacate the district court’s sum-
mary judgment and remand the case to the district court so
that it can determine in the first instance whether there is suf-
ficient evidence to establish subject matter jurisdiction pursu-
ant to section 7431(d).
See Trentacosta v. Frontier Pac.
Aircraft Indus., Inc.
,
IV.
On remand, the district court shall make findings of fact regarding the dates on which Aloe Vera discovered the respective disclosures underlying each of Aloe Vera’s claims. With respect to Count I, the district court shall make findings of fact regarding the dates on which Aloe Vera discovered each allegedly false disclosure. The court shall have jurisdic- tion over only those claims related to disclosures, if any, that were discovered within the two-year statutory period. With respect to Count II, the district court shall make findings of fact regarding the dates on which Aloe Vera discovered that the IRS had disclosed information to the NTA. If, after mak- ing these factual findings, the district court holds, and we agree, that there is subject matter jurisdiction in this case, we will consider the merits of the appeal from the summary judg- ment. This panel will retain the appeal if the case returns to this court.
VACATED AND REMANDED .