*1 Before E ASTERBROOK , K ANNE , and D IANE P. W OOD , Circuit Judges .
E ASTERBROOK , Circuit Judge . Closed-end mutual funds pay federal income tax on income and capital gains, then notify their investors, to which the tax burden passes through. A shareholder that is tax exempt (such as a pen- sion trust or a university endowment) can claim a refund of the taxes that the mutual fund paid on account of its proportionate investment. Taxable investors get income coupled with a credit for tax the mutual fund has paid. Two pension trusts (for employees of Inland Steel and Caterpil- *2 lar) were shareholders of record in Quest for Value Dual Purpose Fund, a closed-end mutual fund. Quest reported to Northern Trust Co., as trustee of these pension trusts, the gains and taxes attributable to these shares. Northern Trust then filed tax returns and claimed refunds on behalf of the pension funds. During 1991 through 1995, the tax years at issue in this litigation, Northern Trust received more than $6 million in refunds for the benefit of these pension plans.
The United States wants the money back. It contends that, with the permission of the two pension funds, North- ern Trust “lent” the Quest shares to “borrowers” that held all economic incidents of ownership—the right to any dividends on the shares, the right to vote the shares, even the entitlement to sell them and keep the profits. If a bor- rower elected to return the shares at the end of the term, it retained any capital gain or loss. For this set of rights, it paid the pension funds 102% of the market price of the Quest shares on the date the “loans” were made. As the United States sees things, these transactions were sales carrying a misleading label designed to allow the pension funds to reap tax benefits on shares that they no longer owned—while the “borrowers,” though taxable entitles, avoided the economic incidence of taxes on the mutual fund’s undistributed income and capital gains.
These suits (one for each pension fund) were filed late in
1998, less than two years from the date the refund of 1995
taxes had been paid, but more than two after the refunds
for the other tax years had been disbursed. Section 6532(b)
of the Internal Revenue Code, 26 U.S.C. §6532(b), gives the
United States only two years to commence proceedings to
recover erroneously paid refunds, “except that such suit
may be brought at any time within 5 years from the making
of the refund if it appears that any part of the refund was
induced by fraud or misrepresentation of a material fact.”
The complaint alleged that the five-year period applies
*3
because Northern Trust misrepresented that the two
pension trusts were Quest’s “shareholders” and thus eligible
for refunds. On Northern Trust’s motion under Fed. R. Civ.
P. 12(b)(6), the district court dismissed the complaint (with
respect to tax years 1991 through 1994) for failure to state
a claim on which relief may be granted.
Dismissal under Rule 12(b)(6) was irregular, for the
statute of limitations is an affirmative defense. See Fed. R.
Civ. P. 8(c). A complaint states a claim on which relief may
be granted whether or not some defense is potentially
available. This is why complaints need not anticipate and
attempt to plead around defenses. See, e.g.,
Gomez v.
Toledo
,
“Misrepresentation” differs from “fraud;” otherwise §6532(b) would be redundant. Understandably, therefore, Northern Trust does not contend that the United States had to plead with particularity under Fed. R. Civ. P. 9(b). Yet if the normal approach of Rule 8(a) applies, this complaint is *4 unimpeachable. Indeed, it goes beyond what is necessary, for the complaint does anticipate the limitations defense and meet it with a claim that Northern Trust made a “misrepresentation of a material fact.” What more could be required? If, as the district court believed, the word “misrep- resentation” connotes a culpable state of mind, then the complaint pleads that state of mind by using the word “misrepresentation,” for under Rule 9(b) “[m]alice, intent, knowledge, and other condition of mind . . . may be averred generally.” And if, as the United States contends, negligent errors may be called “misrepresentations,” again the complaint is sufficient. Instead of jettisoning the complaint, the district judge should have invited the parties to file motions for summary judgment or held a bench trial; then we would know what state of mind the persons who pre- pared these tax returns had, and we could determine whether that was enough under the statute. Precipitate dismissal of the complaint has prolonged this litigation needlessly.
There remains a possibility that this complaint contained too much rather than too little—that the United States has pleaded itself out of court by alleging things that, if true, devastate its claim. The complaint alleges that the “misrep- resentation” was Northern Trust’s statement that the pension funds were “shareholders” in Quest. The district court saw this as conclusive in defendant’s favor, for status as a “shareholder” is not a “fact” but a legal characteriza- tion of facts. This is a subject we can address now, and we disagree with the district court’s view that only the most concrete statements about the world are “facts” for purposes of §6532(b). The word “fact” is a staple of the legal system, and no one suggests that it has a special meaning in the Internal Revenue Code. There is no linguistic problem in saying that a characterization (“shareholder”) derived from combining an undisclosed view of the law with undisclosed details about the terms of the “loan” is itself a “fact” (or a mixed question of law and fact, which is treated as a fact for *5 many purposes). “Facts” are not limited to those things that can be described by Newton’s three laws of motion. Those case-specific details that serve as minor premises in the legal syllogism and thus determine the outcome are what we normally understand by “facts” (or “adjudicative facts”) in the judicial process.
Consider some parallels. Is “discrimination” under Title
VII a “fact”? Ascertaining the existence of “discrimina-
tion” requires the application of legal rules to events in the
workplace (was someone of a different race promoted under
similar circumstances?, and so on). The Supreme Court
nonetheless held in
Pullman-Standard v. Swint
, 456 U.S.
273 (1982), that “discrimination” is a matter of fact for
purposes of Fed. R. Civ. P. 52 and appellate review. We
know from
Icicle Seafoods, Inc. v. Worthington
,
One could see the same thing through the lens of defama-
tion law. Suppose someone points a finger and shouts:
“That man is a shareholder of Quest!” The statement could
be defamatory if it implied disreputable conduct—if, for
example, the person were a judge who had just rendered a
decision in favor of Quest rather than recusing himself.
Statements that imply propositions that can be true or false
are statements of “fact” rather than “opinion” in tort law.
See, e.g.,
Stevens v. Tillman
,
Nothing else in the complaint had any potential to scuttle
the claim. Thus we must remand. We have learned enough
about §6532(b) to say that, when ruling on motions for
summary judgment or holding a bench trial, the district
court should not treat the word “misrepresentation” as
limited to intentional deception. Only one appellate opinion
to date has discussed that word’s meaning.
Lane v. United
States
,
R EVERSED AND R EMANDED A true Copy:
Teste:
________________________________ Clerk of the United States Court of Appeals for the Seventh Circuit USCA-02-C-0072—6-22-04