The following argument recap is by Erik Zimmerman of the Stanford Supreme Court Litigation Clinic. His preview of this case can be found here.
On Monday, the Court heard argument in EC Term of Years Trust v. United States (No. 05-1541). The question in that case is whether a party entitled to challenge an IRS levy under § 7426 of the tax code may, after the time to challenge the levy has expired, seek a refund of the levied taxes under § 1346, which provides a general cause of action for recovering wrongfully paid taxes and has a much longer statute of limitations than § 7426. The IRS in EC Term of Years Trust levied against the property of a trust to collect taxes allegedly owed by the creators of the trust. The trust failed to bring a challenge under § 7426 within that section’s nine-month statute of limitations, so it brought a challenge under § 1346 instead. The Fifth Circuit held that § 7426 is the exclusive means for challenging a levy, and that an action could not be brought under § 1346 after § 7426’s statutory deadline had passed.
The argument in EC Term of Years lasted only 44 minutes (as opposed to the usual hour), and the justices’ questions suggested that the opinion may require a similarly short devotion of time. While individual justices showed some skepticism toward the United States’ position, the Court seemed largely to have decided to affirm the Fifth Circuit’s holding on the straightforward principle that the existence of a specific remedy under § 7426 precludes a taxpayer’s resort to the more general remedy of § 1346.
Francis S. Ainsa, Jr. of El Paso, Texas, arguing for petitioner, began by appealing to the Court’s prior decision in United States v. Williams. Ainsa asserted that in Williams, the Court had held that third parties could bring actions under § 1346 to challenge tax liens, and that there is no substantive difference between liens and levies. Justice Ginsburg quickly interrupted, reminding Ainsa that the Court had stated twice in Williams that § 7426 was not an available remedy in that case. Justice Ginsburg then essentially stated the government’s argument, which was paraphrased by a number of justices throughout the proceedings: “[W]hen Congress provides a special remedy for a particular class of persons, that special remedy usually excludes a more general provision.†Ainsa responded that Williams had interpreted § 1346 broadly, and that nothing in § 7426 expressly makes its remedy exclusive.
A few of the justices then proceeded to question Ainsa about the purpose and scope of the two statutory sections. Justice Scalia suggested that the reason for § 7426’s short statute of limitations is to allow the government to dispose of seized property quickly. Justice Stevens contrasted the functions of the two sections, pointing out that § 7426 challenges are brought based on the method of collection, whereas § 1346 allows taxpayers to question the underlying tax assessment. Chief Justice Roberts and Justice Ginsburg repeatedly emphasized that § 7426 has a narrower scope than § 1346. And Justice Breyer asked a series of questions reiterating that § 7426 specifically refers to levies, which distinguishes this case from Williams. Ainsa answered all of these questions with variations on the same theme, arguing that the two sections should “be allowed to coexist†because Congress had said nothing explicitly making § 7426 an exclusive remedy, and because liens and levies are pragmatically identical.
The remainder of Ainsa’s time largely repeated the above strands of argument, with the justices largely skeptical of Ainsa’s contentions. Justices Kennedy and Scalia did step in and ask questions that were sympathetic to Ainsa, however. Justice Kennedy pointed out that challenges under § 1346 are not identical to those under § 7426, because challenges under the former may only be brought after the entire tax is paid. And Justice Scalia followed up by suggesting that the government’s interest in resolving disputes over levies within a short time period is not as important when the government has already effectively taken payment of a tax, so resort to § 1346 in a situation like the one here might be acceptable. Justice Scalia even went so far as to tell Ainsa at one point: “I’m helping you.†Chief Justice Roberts and Justices Breyer and Ginsburg quickly jumped in again with adverse questions, however, closing the argument by suggesting that allowing challenges to levies under § 1346 would “eviscerate†the short statute of limitations under § 7426—with Justice Breyer even coaxing Ainsa into admitting as much.
Deanne E. Maynard, Assistant to the Solicitor General, then argued on behalf of the United States as respondent. Maynard opened with the government’s consistent theme: “When Congress creates a specific remedy for a specific situation[,] that remedy forecloses resort to a more general remedy when that general remedy would frustrate the purposes of the specific remedy.†Justices Scalia and Alito immediately questioned Maynard regarding another doctrine, however, and their questioning dominated most of her argument time. Those justices asked whether the government was arguing that § 7426, which had been passed after § 1346, had partially repealed § 1346 by implication. Scalia and Alito suggested that implied repeal would not be fatal to a cause of action for challenging levies that had already existed under § 1346. Maynard responded that the implied repeal analysis should not apply here, and she instead referred the justices repeatedly back to the doctrine that a specific remedy forecloses resort to a more general remedy. Later in the argument, Maynard was also able to point to Justice Scalia’s own opinion last term in Rancho Palos Verdes, which Maynard said contained a footnote stating that the implied repeal analysis would be improper in a case like this. (Scalia’s response invoked laughter from the audience: “I forgot about that footnote.â€). And Justice Breyer even went so far as to assist Maynard by reading from a case, A.S. Kreider, that he had just requested from the library. In Kreider, according to Justice Breyer, the Court had held that a specific statute of limitations in the tax code trumped a more general statute of limitations that had existed previously.
The only other significant questioning of Maynard came from Chief Justice Roberts, who pressed Maynard as to why Congress did not state explicitly when § 7426 was enacted that it was creating an exclusive remedy for challenging levies. Maynard responded that the state of the law was unclear at the time § 7426 was passed, and Congress may not have even realized that a refund suit by a third party was possible under § 1346. Maynard concluded, therefore, that there was no reason for Congress to include such an exclusivity provision.
In his rebuttal, Ainsa argued that the United States’ reliance on certain cases, like Kreider, in which specific remedies had displaced more general ones was misplaced because those cases were distinguishable. He also questioned the government’s underlying assertion that a short time period for challenging levies is necessary, pointing out that the IRS in this case had waited over eighteen years from the date in which the taxes were allegedly owed to bring the levy against the trust.
Through its questioning, the Court suggested that it was more persuaded by the arguments of the United States than those of petitioner. Justices Stevens, Ginsburg, and Breyer strongly supported the government’s position, and Chief Justice Roberts appeared to lean in that direction as well. Justices Scalia, Kennedy, and Alito were more sympathetic to petitioner, but they did not go so far as to suggest that they would hold in petitioner’s favor. And Justices Souter and Thomas asked no questions during the argument. As long as at least one of the latter five justices sides with the United States, therefore, the Court will likely affirm the Fifth Circuit in this case and hold that § 7426’s procedures for challenging levies preclude resort the procedures of § 1346. As mentioned in the preview for this argument, therefore, it might appear curious that the Court granted certiorari in this case. If nothing else, the Court may be clarifying the rule in this case for the sake of the Ninth Circuit, which has come down on the opposite side of the circuit split on this issue.
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