The Pfeiffer Company, a Corporation v. United States
518 F.2d 124
8th Cir.
1975
Check Treatment

*1 such as in bad faith tion has been attorneys’ fees.17

justify an award of (appeal) 73—1960 judgment in No.

The retrospective relief insofar as

is reversed

was ordered. (cross- judgment 73—1961 in No.

appeal) is affirmed. COMPANY,

The PFEIFFER

corporation, Appellant, America,

UNITED STATES Appellee.

No. 74-1650. Appeals, States Court of Eighth Circuit.

Submitted Jan.

Decided June

Rehearing Rehearing En Banc

Denied June prospective injunction (not 17. We decide that in the issues involved court’s here), an issue plaintiffs’ appeal is no merit to on this there the district court would consider anew attorneys’ presume question attorneys’ fees. We the theory fees on a bad faith plaintiffs prove plaintiffs’ defend- should below that the in relation to efforts to en- complied injunctive ants have not force the relief. *2 Law, Louis, Mo., ap-

Hugh R. St. pellant. Lombardi, Div., Atty., Tax

Alfred S. Justice, C., Washington, Dept, of D. appellee. GIBSON, Judge,

Before Chief ROSS, Judges. HEANEY and GIBSON, Judge. Chief Company appeals The Pfeiffer the Dis grant summary judg Court’s1 trict dismissing its refund of claim for 1970 taxes. It claims the enforced of additional taxes assessed collection pendency of a refund suit for illegal as viola the same taxable 7422(e)of the Internal Revenue tive of § 7422(e) (1970), requirements of Fed.R.Civ.P. respecting compulsory counter We affirm. claims. undisputed.

The facts are The tax- corporation $19,- payer reported earnings accumulated taxes for the calendar filing After refund with the IRS and wait- required by ing six months as (1970), taxpayer filed a district July, refund suit in 1972. Soon thereafter, the IRS audited taxpay- gave er’s 1970 return and Pfeiffer the statutory 90-day notice of its determina- to assess an additional accumulated earnings $44,877.39. penalty 8, 1972, September the Government plaintiff’s complaint filed its answer2 to gave “potential Regan, notice of a The Honorable John K. United States counterclaim” Judge which it Eastern District of would later file in District Mis- the event the tax- souri, payer reported were to elect filed Memorandum and Order F.Supp. (E.D.Mo.1974). Court for redetermination ficiency, but which it later chose not to file. challenged In its answer $19,000 refund and demand September stay 11 moved for the May, 1973, filed a claim 7422(e).3 proceedings for refund of which was disal granted The court lowed October, the following IRS 29, 1973, opportunity finally, on November insti petition the Tax Court for redetermi tuted this second challenging *3 $44,877.39 the additional of defi nation assessment procedural Pfeiffer, however, ciency. elected not to grounds.5 The District grant of January the Tax Court and on petition summary judgment in favor of an suffered additional assess Government in the second lawsuit is the $44,877.39. days of Within ten ment subject appeal. sole of this protest, under the additional tax. Thereafter, court, leave of with presented The issue is a narrow one— adding complaint, its a Pfeiffer amended may lawfully whether count for refund of the additional second assess while $44,877.39 payment. Govern for refund a suit of taxes for motion, however, the court dis ment’s pending district court prejudice due or, this count without alternatively, missed whether the Govern- taxpayer’s jurisdictional failure ment’s exclusive tax remedy collection remedy claim pursue administrative under such a by circumstance is counter- 7422(a).4 Left with pending refund suit. Tax- $19,000 original refund of payer’s argument rests on a somewhat then for tactical reasons con taxpayer appealing construction interacting of the complaint sented to dismissal of its with procedural governing statutes tax refund prejudice. litigation, specifically 7422(e) §§ 3. 26 for such tion is the case If the for a redetermination of the asserted defi- pired. subject the Court payer the district court or the Court of asserted ciency, during a notice mined in subject income1tax ceedings counterclaim in the brought by vene or his the Tax Court for a redetermination of the Civil actions for refund. (e) Stay proceedings notwithstanding may * * * delegate prior matter of and for 60 acquired by matter of files may pleading of respect of suit to whatever extent file a period a 7422(a) (1970) taxpayer’s [*] * * * Claims for the proceedings. a be, within the does not file a petition petition of time in which the tax- [*] of the tax which is the taxpayer’s shall lose days states in relevant to the the Tax Court of the mails to the in a district court or suit shall be [*] with the Tax have otherwise ex- with the Tax Court United States the—If thereafter. period states: hearing has been deter- recovery suit for refund. [*] suit, suit, petition that the time Claims, Secretary of a suit jurisdic- or inter- of stayed If the part: pro- any of 5. The The payer’s payer’s claim that: District Court was the narrow pursuant exclusive year’s owed ized and void and enforcement of collection district court suit for refund of the same ment, notice and demand [entered while the [Fed.R.Civ.P.] [The —No suit been excessive or in has been in that suance penalty revenue ly delegate, according collected, until a claim for refund or credit out (a) complaint any only justification authority, illegally by plaintiff 1970 tax second No suit taxes was court for the of the Internal Revenue thereof. claimed to have by provisions (authorized regard, thereto duly filed with the remedy or his alleged contained complaint prior assessed or or of and the illegal, delegate established in for said pending] if additional 1973, $44,877.39] to the any recovery for relief stated in tax- filing have no on the merits. because defendant’s sum been shall be maintained year, manner collected, regulations challenge provisions claim for refund. were unauthor- been Secretary rejected alleged of collected *. Code) any taxes were procedural wrongfully erroneous- of Section or of internal to have assess- of law of the under coun- or his with- tax- pur- any

Civil actions for refund. remaining options 6213,6 ignores the short, taxpayer but maintains that the the assessment obliged the IRS for open of taxes. pending collection forego suit or the collection refund is notified a tax aWhen ‘7422(e)’s tax. Section 6213(a)prohibits assessment deficiency, § ar- Pfeiffer mandate days the 90 allowed gues, overrides redetermination, Court for 6213(c). Secondly, in tax- procedure of § filed, prohibits assess- aif Government was re- view the deficiency until the judg- ment its retained common law to assert quired If, is final. as in against action debt case, the Government asserts instant compulsory counterclaim by a previously deficiency while filed court under Rule concerning the same *4 Fed.R.Civ.P. Since 7422(e) stays proceed- pending, § contrary of the standard assessment use Tax Court during 90-day peti- the ings taxpayer’s attempt frustrated procedure days 60 and for thereafter. period tion all of its 1970 to consolidate that if the provides It further court, the fo- in choice, tax petition, the his Tax Court timely files argues Pfeiffer the of its rum to the Tax will be transferred Court thereby “short-circuited” Government acquires Tax extent the Court the judicial process. the the pending virtue of subject matter. response, argues related suit’s hand, elects nullify not does not first § Tax as did in Pfeiffer mandated assessment petition Congressionally pending 6213(c). 7422(e)’s Section procedure the instant argues, the district court in it provision remains not “may mandatory. counterclaim in the merely permissive, * * * pe- Second, suit within the asserts it proceedings.” 13(a), procedure 26 Rule counterclaim Fed.R.Civ.P., riod 7422(e) (emphasis displace not the broad Sec- does § U.S.C. 7422(e), however, is silent as collection scheme afforded further, alternatives should because the Govern- Government’s not to counterclaim in the tax- suit, collect the right ment’s choose legally as it did here. While ficiency admit- not mature into did payer’s ting “may” expiration means “is cognizable authorized claim until “may permitted to,” days Pfeiffer reads counterclaim” to seek 90 review, counterclaim or suffer “must the con- counterclaim for as Third, required. tax was sequences.” * * * supra. nor, petition is set out in note § 26 U.S.C. if a has been filed until the decision of the (1970) part: 6213 states in § relevant final. Court has become Notwithstand- deficiencies; pe- applicable Restrictions ing provisions of section to Tax Court. tition making beginning of such assessment or the (a) fíling petition Time for and restriction levy * proceeding * * of such or the time days 90 assessment. —Within prohibition enjoined such force be notice after authorized proceeding proper * * , taxpay- 6212 mailed section ****** may file a er with the Tax Court for deficiency. Except (c) petition. a redetermination taxpay- to file Failure the —If provided [jeop- otherwise in section 6861 as er does not file a with the Tax Court ardy assessments], prescribed (a), no assessment of a defi- within the time in subsection ciency levy and no notice of which has been made, taxpayer, assessed, collection shall be in court be- mailed to the shall be gun, prosecuted upon such notice has and shall be notice and demand taxpayer, delegate. been mailed nor until from the or his * * * expiration 90-day period of such applicable to an As this court stated Florida v. Unit- construe States, while a refund suit ed 1960): F.2d asserted effectively shorten pending statute of year limitations three general nothing find We in § which clearly contrary 6501, a result §in prohibits the Commissioner from as Thus, the Govern- intent. Congressional sessing for tax deficiencies in the * * * subsequent assessment argues the way. normal The statute 6213(c) regular under procedurally provides that where a refund suit 7422(e), unlawful not rendered pending dis failed assert because court, trict in grounds support of its re- any other tervene and assert [or counterclaim] claim, properly the District Court fund a deficiency. nothing There is judgment. summary awarded the statute to Congress indicate that such intended that should be the agree with the District remedy. Government’s exclusive conclusion (emphasis added and footnote omitt 15, 1973, while the tax entered ed).8 for the same in the district court was pending was procedurally Similarly, context, in a discussing related regular and enforceable. 1346(a)(1)(1970) Flora v. Ranch, Phinney, L. Inc. v. F.2d Bar U.S. S.Ct. *5 90, 1968).7 6213(c) (5th Cir. 92 Section (1960), L.Ed.2d 623 Supreme 4 recognized Court provides a directive re which taxpayer that when a is faced ig is the Government assess quiring with an additional related deficiency argument and no nored his while district court refund suit is suggests language in that that it section he has two pending, mutually exclusive permissive subordinate to the counter is 7422(e): options under he can petition § 7422(e): procedure of § Tax Court hope with the the dating of consoli- dispute the entire or pur- he can taxpayer If the does not file a his “Moreover, district court suit. sue if petition with the Tax Court within he decides remain in the District prescribed time in subsection Court, may seem- —but [6213](a), notice of ingly bring is not a coun- to— has been which mailed to the tax- 166, 362 U.S. at 80 S.Ct. at [.]” assessed, payer, shall be and shall be 641 upon notice and demand from or his delegate. The support sole cited for the 6213(c) § (emphasis added). counterclaim the Taxpayer’s argument-by-implication ory Congressional policy is the evidenced 6213(c) § overrides § or in favor granting § tax collection device available to the unobstructed choice litigation Government under the Code is not well forums—between the Tax taken. Court on one hand and the district Ranch, case, In Bar L. petitioning the instant the Tax Court. In order to main- sued for refund in the authority district court tain the division of between Tax (the day) thereafter and courts, the IRS a mailed Court and the other deficiency Taxpayer power notice for more tax. to enter such a second assessment must elected not the Tax recognized. Court for rede- be termination and the IRS as- Although challenged sessed the additional ever, tax. alternative In that collec- how- tion device issue pay Florida case chose not to the addi- a Government, lien enforcement turn, The tional tax. under success- 7403(c) subsequent fully rather than a intervened in the 6213(c), under § the court’s subsequently construction collect assessed tax. The equally applicable affirmed, is holding Fifth instant the IRS’s case. protected by power to assess is interrupted taxpayer only by be can on taxpay of Claims the other. a equally or Court intended honor court v. Graham Post all over Joe to consolidate States wish er’s Legion, 474, into a given, 340 F.2d American his denied, Cir.), single That cert. before a court. single U.S. (1965). fundamentally agree 15 L.Ed.2d misconceives assertion S.Ct. give Congress intended of the Tax Court on functions different court rather the district than to the to the hand choice the one While the other.10 Both the House and Sen on of Claims Government. legisla likely occur reporting will Committees ate such consolidation expressed clearly: a Government coun in 1954 intent absent necessarily occur in terclaim, not it will 7422(e)] provision new [Section the district the situation where there is to cover jurisdiction in the concurrent district primary purpose contrary, On the (or Claims) Court of and in the court juris- 7422(e) is to concurrent avoid over the Tax Court same case. This give one ad- diction arise, may example, where the opportunity to reach ditional files suit for into not draw and, while suit extraordinary court in an the district notice of pending, is- outside expedited fashion the standard he appeals that notice to sued scheme. Cf. Zeeman Unit- procedural * * Tax Court. If the tax- (2d F.2d 865-66 ed 1968). appeal payer does [to stops compel- short of The Court], the United States then disputes of all tax ling consolidation taxpayer's given the district court. That court’s discretion left (e) result under subsection Fed.R.Civ.P., subject under Rule jurisdiction over the cause proper circum- jurisdiction matter (2 only court action to courts consolidation exist. stances acquire existing under *6 Taxpayer’s argument final that the law), and to the ju required by was Rule which court shall have choice of Fed.R.Civ.P., independent of taxpayer, by filing risdiction. The law its common ac 7422(e), to assert in the Tax would by way of tion of debt juris that court to have sole cause persuasive. The Government’s asser diction, or, by failing peti to file a against taxpayer tion of the in would cause $44,877.39in taxes did not the district court the Court of an enforceable claim relief ripen into sole jurisdiction, to have Claims encompassed by Rule 13 the sort of added).9 assessment was en tax States, however, v. United company, tered. Crocker partWe By (N.D.Miss.1971).11 that F.Supp. assertion given jurisdiction nor language of Court Claims This identical contained both litigation S.Rep. H.R.Rep. redetermine deficiencies. Tax No. 1337 and 83d courts, Sess., those Cong., Cong. absent a counterclaim U.S.Code 2d & Admin. 7422(e), (1954). Government under § is limited News 4579-80 generally suit for a refund. See J. scope inquiry of into The Tax Stephens, R. Freeland & Fundamentals of Fed- liability year’s case in the usual given (1972). eral Income Taxation 899 the district court or Court that of than broader jurisdiction is the Tax Court’s If of Claims. reliance Our on Crocker does not extend to response to a properly invoked that court’s conclusion dicta that once the notice, finding entered, can in addition it 13(a) compels assessment deficiency, determine that is no notwithstanding there that counterclaim Government overpayment to be refunded permissive wording 7422(e). been has there 6512(b)(1) (1970). taxpayer. hand, the district court neither theOn assessment, except HEANEY, Judge (concurring). statute assessment, not be jeopardy of case I opinion concur majority solely the no- days after until 90 accomplished grounds fore- Moreover, issued. deficiency was tice rights its closed contest validity wide has a because 1970 tax its suffering a sum- tax collection extra-judicial range judgment to mary against be entered it. that the we doubt disposal, its vices at view, my In Florida v. can be Procedure of Civil Rules Federal 1960), F.2d 596 was wrongly to liti- compel the read to decided and should not be followed us for reasons when, as in this gate this case. If issue decided in Flor- Also, because to. chooses not it own its presented squarely here, was ida I would after request that our Court hear the matter paid the promptly en banc so that could reconsider that was satisfied claim the Government’s my view, In Congress decision. intended opportuni- need or no further it had give the taxpayer the choice of tax permissively ty to forums that choice can be hon- suit. if the ored right has the consolidate all bility over his tax lia- the Government’s We hold that given into a single assessment entered while tax single before a way we suit for refund of taxes matter, leave the real choice still lies pending in the Dis government and that is con- procedurally permissible. trict Court trary to Congress what intended. gener agree While we have the choice of forum in ally should situation, plaintiff this is en

the refund Taxpayer paid no relief.

titled subsequent under the assess prematurely sued

ment and for refund.

The Government obtained dismissal taxpayer’s premature amended count agreed

and the to dismissal thereby voluntarily prejudice, fore

with closing entirely. its first de ASOCIACION TRABAJADORES taxpayer argued only second de AGRICOLAS PUERTO RICO and subsequent as Irizarry Valentin, Juan Individually because was re was void sessment *7 capacity president his proceed quired coun Trabajadores Agricolas Asociacion de Failing first suit. de Puerto Rico and all others similarly choosing on that and otherwise situated, Appellants, proving entitle to meet its burden refund, ment summary suffered affording judgment without it GREEN GIANT COMPANY et al. litigate chance to self merits liability. rights its 1970 Whatever 74-1957. had, any, have have States of Appeals, determined in a sin its 1970 Third Circuit. were, by the of its gle therefore, choice Argued March foreclosed by taxpayer’s failing to counterclaim and May 30, Decided contesting in not the merits own actions separate suits that of the assessment later be consolidated. possibly judgment of the District Court is

affirmed.