CARMELA RIVERO v. FIDELITY INVESTMENTS, INCORPORATED
No. 20-40371
United States Court of Appeals for the Fifth Circuit
June 10, 2021
Before HIGGINBOTHAM, STEWART, and WILSON, Circuit Judges.
Appeal from the United States District Court for the Eastern District of Texas, USDC No. 4:18-CV-909
Carmela Rivero seeks a declaratory judgment that an IRS transfer certificate is not necessary to transfer ownership of her account with Fidelity Brokerage Services, LLC (“Fidelity“). Concluding that such a declaration “would necessarily involve a determination ‘with respect to Federal taxes,‘” the district court sua sponte dismissed the action for lack of subject-matter jurisdiction. The primary question is whether the Declaratory Judgment Act’s (“DJA“) federal-tax exception is a jurisdictional condition, requiring dismissal, or a nonjurisdictional condition, which may be waived. Concluding it is jurisdictional, we AFFIRM.
I.
Rivero, a Mexican citizen and Texas resident, opened an individual brokerage account with Fidelity (the “Account“) in 2010 by transferring 1,900 shares of PepsiCo stock valued at $121,600 from her existing individual brokerage account with Merrill Lynch. Two weeks later, she re-registered the Account as a joint tenancy with right of survivorship, naming Jorge Diaz-Gonzalez Medrano, a citizen and resident of Mexico, as the joint tenant.
Medrano died in 2016. Following his death, Rivero attempted to re-register the Account as an individual account, solely in her name. But Fidelity prevented her from doing so because Treasury Regulation
if the value on the date of death of that part of the decedent‘s gross estate situated in the United States did not exceed the lesser of $60,000 or $60,000 reduced by the adjustments, if any, required by section 6018(a)(4) for certain taxable gifts made by the decedent and for the aggregate amount of certain specific exemptions.
Rivero asserts that she is unable to obtain a transfer certificate “because it requires cooperation from other persons.” Moreover, she contends a transfer certificate is not necessary for two reasons. First, she asserts that, as a joint tenancy with right of survivorship, the Account automatically
Rivero filed a complaint for a declaratory judgment that she is the sole owner of the Account and that “filing . . . an IRS Transfer Certificate, Form 5173, is not necessary to transfer ownership of the . . . Account.” Rivero and Fidelity filed cross-motions for summary judgment. Rather than reach the parties’ motions, however, the district court sua sponte held that Rivero‘s requested declaration would require the court “to construe various tax code provisions and treasury regulations to value Medrano‘s gross estate, [which] involves a determination ‘with respect to Federal taxes’ that is precluded by the plain language of the [DJA].” The court dismissed Rivero‘s complaint for lack of subject-matter jurisdiction and denied the parties’ cross-motions for summary judgment as moot.
II.
Questions of subject matter jurisdiction are reviewed de novo. Borden v. Allstate Ins. Co., 589 F.3d 168, 170 (5th Cir. 2009) (citation omitted). The district court‘s “jurisdictional findings of fact” are reviewed for clear error. Lonatro v. United States, 714 F.3d 866, 869 (5th Cir. 2013) (citation omitted).
“The basic statutory grants of federal-court subject-matter jurisdiction,” providing for federal-question and diversity-of-citizenship jurisdiction, “are contained in
In a case of actual controversy within its jurisdiction, except with respect to Federal taxes . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration . . . .
A.
“[S]ubject-matter jurisdiction, because it involves a court‘s power to hear a case, can never be forfeited or waived.” United States v. Cotton, 535 U.S. 625, 630 (2002).
“[J]urisdictional statutes speak to the power of the court rather than to the rights or obligations of the parties.” Landgraf v. USI Film Prods., 511 U.S. 244, 274 (1994) (internal quotation marks and citation omitted). In a nutshell, jurisdictional conditions circumscribe a court‘s power to hear a case, whereas nonjurisdictional conditions impose obligations on a party. Id.; Arbaugh, 546 U.S. at 504. A quintessential jurisdictional condition is the amount-in-controversy requirement in
The Supreme Court has cautioned against “mischaracteriz[ing] claim-processing rules or elements of a cause of action as jurisdictional limitations.” Reed Elsevier, 559 U.S. at 161.
If the Legislature clearly states that a threshold limitation on a statute‘s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.
Id. at 161–62 (quoting Arbaugh, 546 U.S. at 515–16).
Arbaugh is instructive for the task at hand. There, the Supreme Court looked to the text and structure of Title VII‘s numerosity requirement to determine whether the statute delineated a jurisdictional condition. 546 U.S. at 513–16. Because
Examining the text and structure of the DJA‘s federal-tax exception leads to the opposite conclusion: the statute plainly “speak[s] to the power of the court.” See Landgraf, 511 U.S. at 274 (citation omitted). Indeed, the exception is an express limitation on the grant of power to “any court of the United States” to “declare the rights and other legal relations of any interested party seeking such declaration.”
This conclusion is further supported by our precedent construing a similar statute. The Anti-Injunction Act (AIA) provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.”
B.
Treasury Regulation
transfer stock registered in the name of a non-resident decedent . . . [unless] the value on the date of death of that part of the decedent‘s gross estate situated in the United States did not exceed the lesser of $60,000 or $60,000 reduced by the adjustments . . . for certain taxable gifts made by the decedent and for the aggregate amount of certain specific exemptions.
The district court found that, under either scenario proffered by Rivero, to declare that no transfer certificate is necessary would require the court “to construe various tax code provisions and treasury regulations to value Medrano‘s gross estate” and make a “determination ‘with respect to Federal taxes’ that is precluded by the plain language of the Declaratory Judgment Act.” We discern no error, much less clear error, with regard to this finding. Indeed, we agree with the district court that deciding the merits of Rivero‘s request for declaratory relief would inevitably involve sifting through the applicable Treasury regulations discussed above in order, ultimately, to make a determination “with respect to Federal taxes,” beyond the power granted to federal courts by the DJA.
III.
The DJA prohibits courts from providing declaratory relief with respect to federal taxes; that prohibition is jurisdictional. Because the requested relief—declaring that Rivero was not required to provide a transfer certificate to Fidelity—necessarily involves a determination with respect to federal taxes, the district court properly dismissed Rivero‘s action for lack of jurisdiction.
AFFIRMED.