Carlos Lovell, Fred Lovell, Lovell Cattle Co. v. United States

795 F.2d 976, 58 A.F.T.R.2d (RIA) 5607, 1986 U.S. App. LEXIS 27977

• Court: Court of Appeals for the Eleventh Circuit
• Decided: August 8, 1986
• Docket: 85-8860
• Status: Published

Opinions

JOHNSON, Circuit Judge:

This is an appeal from the district court’s pretrial order dismissing a suit by appellants for injunctive relief against Internal Revenue Service (IRS) levies and tax liens executed to satisfy a jeopardy assessment. We AFFIRM the judgment of the district court.

I

The IRS entered the jeopardy assessment at issue in this case against Lovana Farms, Inc. (“Lovana”), a Georgia corporation owned by Virgil- Lovell. To satisfy a portion of this assessment, the IRS filed notices of lien against Carlos Lovell (Virgil Lovell’s father), Fred Lovell (Virgil Lovell’s uncle), and the partnership formed by the two elder Lovells, the Lovell Cattle Company (LCC); it also seized some $11,500 from Carlos Lovell’s bank account. These parties were all involved in what the government alleged was an abusive tax shelter involving questionable sales of cattle from LCC to Lovana, and from Lovana to certain “investors.” Neither the elder Lovells nor LCC received pre-seizure notice of the IRS liens.

The appellant sought injunctive relief against the IRS action and also filed a claim for wrongful levy under Internal Revenue Service Code § 7426 and a quiet title action under 28 U.S.C.A. § 2410. The district court severed the latter two claims for separate trial. That court concluded that the action for injunctive relief was due to be dismissed under the Anti-Injunction Act, 26 U.S.C.A. § 7421(a), which generally mandates that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, unless that person falls under certain exceptions. The district court found that no exception applied. This appeal followed.

II

We may not reverse a district court order denying a preliminary injunction unless the lower court abused its discretion. Callaway v. Block, 763 F.2d 1283, 1287 (11th Cir.1983). No such abuse of discretion was present here.

Appellants contend that they were entitled to pre-seizure notice from the IRS under the terms of code section § 6212(a), which provides for such notice to “taxpayers,” or, alternatively, under code § 6901, which provides for such notice to “transferees.” The district court rejected these arguments. It reasoned (1) that since Lova-na, not the Lovells or LCC, was the “taxpayer,” no notice to the latter was necessary under § 6212(a); (2) that the Lovells were in any case “alter egos” of Lovana and thus, were sufficiently informed by the pre-seizure notice sent to Lovana; and (3) that even if the Lovells were not alter egos of Lovana, they were third parties not entitled to contest the merits of the assessment against Lovana. The court determined further that the IRS pursued the Lovells as a part of a single whole with Lovana, not as transferees, so that code § 6901 is inapplicable.

Appellants challenge these conclusions on appeal. We need not reach the alter ego and transferee issues. We hold that even if appellants did qualify for notice under either theory, they must still be denied injunctive relief because they do not show irreparable harm and inadequacy of alternative remedies. In so holding, we follow the Ninth Circuit’s conclusion that for a tax injunction to issue despite the general prohibition of the Anti-Injunction Act, the movant must not only qualify under an exception to that Act, but must also satisfy traditional standards for equitable relief. Cool Fuel, Inc. v. Connett, 685 F.2d 309, 313-314 and n. 1 (9th Cir.1982). See also Perlowin v. Sassi, 711 F.2d 910, 912 (9th Cir.1983); Philadelphia and Reading Corp. v. Beck, 676 F.2d 1159, 1163 (7th Cir.1981).

In Cool Fuel, the Ninth Circuit noted that:

Injunctive relief against the IRS is generally prohibited by the Anti-Injunction Act. 26 U.S.C. § 7421(a). Although Congress has recognized exceptions to the Anti-Injunction Act (in this case the exception carved out by § 6213 where statutory notice procedures have not been followed), neither the statute nor the legislative history says anything to support a contention that the usual equitable prerequisites to injunctive relief should not be required.

Cool Fuel, supra, at 313. As the Ninth Circuit panel indicated, the Supreme Court has held that an injunction should issue

only where the intervention of a court of equity “is essential in order effectually to protect property rights against injuries otherwise irremediable.” The Court has repeatedly held that the basis for injunctive relief in the federal courts has always been irreparable injury and the inadequacy of legal remedies.

Id. at 314 n. 1 (citations omitted).

In the instant case, the district court found that appellants would not suffer irreparable harm if an injunction did not issue. This finding was not contested on appeal.

The lower court also determined that appellants had alternative remedies available, short of the extraordinary measure of an injunction, in the form of the wrongful levy and quiet title actions. Indeed, that court actually calendared a post-seizure adjudication for the Lovells and LCC on these claims so that their rights could be determined quickly. The Lovells obtained a continuance of these actions.

Absent any showing of irreparable harm and inadequacy of legal remedies the federal courts have no equity jurisdiction and this suit for injunctive relief is due to be dismissed. The legality of the tax liens against the Lovells and LCC may be decided on the merits in the wrongful levy and quiet title actions.

AFFIRMED.