United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 16, 2011 Decided February 21, 2012
No. 11-5127
PAUL KEOHANE,
APPELLANT
v.
UNITED STATES OF AMERICA,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:08-cv-02081)
David W. Foster argued the cause for appellant. With
him on the briefs were Armando Gomez and Alan J.J. Swirski.
Janet A. Bradley, Attorney, U.S. Department of Justice,
argued the cause for appellee. With her on the brief were
Tamara W. Ashford, Deputy Assistant Attorney General,
Ronald C. Machen, U.S. Attorney, and Michael J. Haungs,
Attorney.
Before: BROWN, GRIFFITH, and KAVANAUGH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge
KAVANAUGH.
2
KAVANAUGH, Circuit Judge: For the 1994 tax year, Paul
Keohane owed about $10,000 in federal income taxes for
income he earned while working in Indonesia. He did not pay
those taxes. To recover the unpaid taxes, the IRS eventually
issued what is known as a single paper levy on Keohane’s
Social Security benefits. That paper levy automatically took
nearly 40% of Keohane’s monthly Social Security checks for
about two years. Keohane now claims that the amount levied
each month exceeded a statutory cap on monthly levies.
Of course, now that the full amount owed by Keohane to
the IRS has been paid – and would have been paid in full by
now even under Keohane’s view of the maximum monthly
levy amount – Keohane is suffering no further harm from the
IRS’s alleged error. But Keohane has sued to recover the
expenses he incurred along the way from the allegedly
unlawful levy schedule. Those expenses total $373.
To recover the $373 in expenses, Keohane sued under 26
U.S.C. § 7433. That statute allows taxpayers to sue the
United States to recover damages caused by illegal IRS
actions. The threshold question before us is whether
Keohane’s suit was timely. The District Court concluded that
it was not timely because Keohane did not bring suit within
two years of when he had a “reasonable opportunity to
discover all essential elements of a possible cause of action.”
26 C.F.R. § 301.7433-1(g)(2). We agree and affirm.
I
Paul Keohane, a U.S. citizen, worked in Indonesia in
1994. He did not file a timely federal income tax return for
that tax year. The IRS assessed a net deficiency of
approximately $10,000 for that year. In 2000, the IRS sent
Keohane two notices of intent to levy. In 2002, it sent two
3
more notices. Because he was moving from place to place,
Keohane received none of those notices.
In May 2005, the Social Security Administration sent
Keohane a notice of an IRS levy on his Social Security
benefits. Keohane received the notice in May or June. The
levying began in June 2005, with the IRS taking $451.90 out
of Keohane’s $1135 monthly Social Security payment (which,
by 2007, rose to $1220). The amount taken out each month
constituted between 35% and 40% of each Social Security
check. To execute its levy on Keohane’s Social Security
benefits, the IRS issued what is known as a single paper levy
to the Social Security Administration. After issuance of the
single paper levy, the monthly removal of $451.90 from
Keohane’s Social Security check occurred automatically
without any additional action by the IRS. In other words, the
IRS did not have to execute any additional paper levies. That
monthly removal continued for about two years.
In 2007, Keohane filed a late tax return for 1994 and
squared up his debt with the IRS. The IRS then released the
levy on Keohane’s Social Security benefits.
Although Keohane could have ended his dealings with
the IRS at that point, he became upset when he learned that
the IRS, as it recouped the debt, had allegedly violated a
statute setting limits on how much the IRS could take from
his Social Security check each month. Although that issue
was of no continuing concern to Keohane with respect to his
tax liability (which had been paid in full by then), Keohane
brought a claim to recover expenses he had incurred as a
result of the allegedly unlawful schedule by which he paid the
taxes due. After an unsuccessful administrative claim,
Keohane sued the United States in December 2008 under 26
U.S.C. § 7433. That statute permits recovery of “actual,
4
direct economic damages sustained by the plaintiff” plus “the
costs of the action” if, in connection with IRS tax collection,
“any officer or employee of the Internal Revenue Service
recklessly or intentionally, or by reason of negligence,
disregards any provision of this title, or any regulation
promulgated under this title.” 26 U.S.C. § 7433(a)-(b).
Keohane argued that 26 U.S.C. § 6331(h)(1) forbids the
IRS from employing a single paper levy to continuously take
more than 15% of each monthly Social Security benefit
payment. In Keohane’s case, a 15% monthly cap would have
meant a maximum of between $170 and $180 per month. The
IRS took $451.90 per month, between 35% and 40% of
Keohane’s monthly Social Security benefits. Under
Keohane’s theory, the IRS should have recovered the back
taxes by taking less each month for a longer period of time.
Or the IRS, according to Keohane, should have employed the
separate legal mechanism by which it could re-issue a new
paper levy each month and take more than 15% per month.
The parties stipulate that Keohane incurred $373 in costs
as a result of the IRS’s levying more than 15% of Keohane’s
monthly Social Security benefits.
Without reaching the merits of Keohane’s statutory
argument, the District Court concluded that Keohane’s suit
was barred by the two-year statute of limitations in Section
7433(d)(3), and it granted summary judgment to the
Government. See Keohane v. United States, 775 F. Supp. 2d
87, 91 (D.D.C. 2011).
5
II
A
Section 7433 of Title 26 provides a cause of action if “in
connection with any collection of Federal tax with respect to a
taxpayer, any officer or employee of the Internal Revenue
Service recklessly or intentionally, or by reason of negligence,
disregards any provision of this title, or any regulation
promulgated under this title.” 26 U.S.C. § 7433(a). A
taxpayer who sues under Section 7433 may collect the “costs
of the action” and the “actual, direct economic damages
sustained by the plaintiff as a proximate result of the reckless
or intentional or negligent actions of the officer or employee.”
26 U.S.C. § 7433(b).
But Section 7433 contains a two-year statute of
limitations: “Notwithstanding any other provision of law, an
action to enforce liability created under this section may be
brought without regard to the amount in controversy and may
be brought only within 2 years after the date the right of
action accrues.” 26 U.S.C. § 7433(d)(3).
The IRS’s regulations implementing Section 7433(d)(3)
provide that the right of action “accrues when the taxpayer
has had a reasonable opportunity to discover all essential
elements of a possible cause of action.” 26 C.F.R.
§ 301.7433-1(g)(2). The parties agree that the regulation
applies here. The parties disagree only about when Keohane
had such a “reasonable opportunity.”
B
By June 2005, Keohane received a letter informing him
of the IRS levy. That same month, the IRS took its first
$451.90 from Keohane’s Social Security check – a sum
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Keohane knew to be more than 15% of his benefits. By June
2005, therefore, Keohane knew that an IRS levy had been
placed on his Social Security benefits and that the levy was
taking more than 15% of those benefits each month. He
nonetheless did not file suit challenging the legality of the
allegedly excessive monthly amount until more than three
years later, in December 2008.
Keohane offers two arguments to get around the two-year
statute of limitations.
First, Keohane contends that he had no way to know in
2005 that the IRS was relying on a single paper levy instead
of filing a new levy each month. The parties agree that under
a separate section of the Tax Code, the IRS could have legally
taken more than 15% of Keohane’s Social Security benefits
each month simply by filing a new paper levy each month.
Keohane claims, however, that a single paper levy of the kind
at issue here is limited to 15% of monthly Social Security
benefits. Keohane argues that he did not know the IRS was
relying on a single paper levy at the time it began levying his
Social Security benefit payments.
The problem for Keohane is that the statute (as
implemented by the regulation) requires only “a reasonable
opportunity to discover” every element of the cause of action.
26 C.F.R. § 301.7433-1(g)(2); see also Kovacs v. United
States, 614 F.3d 666, 674 (7th Cir. 2010). The language in
the regulation – a “reasonable opportunity” – sets a relatively
low bar. In other contexts, we have said that the “reasonable
opportunity to discover” language in a statute of limitations
“bars a suit if the plaintiff had such notice as would lead a
reasonable person either to sue or to launch an investigation
that would likely uncover the requisite facts.” Sparshott v.
7
Feld Entertainment, Inc., 311 F.3d 425, 428-29 (D.C. Cir.
2002) (interpreting 18 U.S.C. § 2520(e)).
Here, Keohane knew that a levy existed. As soon as he
knew of that levy, he had a “reasonable opportunity” to learn
that the IRS was relying on a single paper levy rather than
issuing a new paper levy each month. Keohane points to
nothing that prevented him from uncovering this fact by
inquiring; indeed, his eventual inquiry revealed the alleged
flaw. Because Keohane had a reasonable opportunity to
discover the IRS’s alleged statutory violation after he received
notice of the levy – by June 2005 – the statute of limitations
on his Section 7433 cause of action began to run at that time. 1
By the time he filed suit in December 2008, the two-year
statute of limitations had therefore run. 2
Second, Keohane points to the continuing violation
doctrine and claims that the statute of limitations didn’t expire
until two years after the IRS’s last wrongful collection from
his Social Security benefits – that is, until July 2009. The
continuing violation doctrine is intricate and somewhat
confusing, but we need not explore it in depth here. We have
said that a continuing violation “is one that could not
reasonably have been expected to be made the subject of a
lawsuit when it first occurred because its character as a
violation did not become clear until it was repeated during the
limitations period, typically because it is only its cumulative
1
To be clear, we are not here suggesting that Keohane is
correct that the IRS’s use of a single paper levy was unlawful. The
IRS vigorously contests Keohane’s interpretation of the statute, and
we leave that question for another day.
2
It is quite possible that Keohane at that time did not know
that the law supposedly established a 15% monthly cap with respect
to a single paper levy on Social Security benefits. But in any event,
unawareness of the law does not toll this statute of limitations.
8
impact (as in the case of a hostile work environment) that
reveals its illegality.” Taylor v. FDIC, 132 F.3d 753, 765
(D.C. Cir. 1997) (citations and internal quotation marks
omitted); see also National Railroad Passenger Corp. v.
Morgan, 536 U.S. 101, 115 (2002) (a hostile work
environment claim “involves repeated conduct” so that the
“cumulative effect” creates a claim even when “a single act of
harassment may not be actionable on its own”); Dziura v.
United States, 168 F.3d 581, 583 (1st Cir. 1999) (continuing
violation doctrine “is generally thought to be inapposite when
an injury is definite, readily discoverable, and accessible in
the sense that nothing impedes the injured party from seeking
to redress it”). Under the continuing violation doctrine, the
statute of limitations begins to run only after the date of the
last injury. See Heard v. Sheahan, 253 F.3d 316, 319 (7th
Cir. 2001).
But the continuing violation doctrine does not help
Keohane here. Under Keohane’s theory, the IRS violated
Section 6331(h)(1) when it issued a single paper levy with the
effect of automatically taking more than 15% of his Social
Security benefits each month. Its “character” as an alleged
violation would have been clear had Keohane inquired; no
“cumulative effect” was necessary to reveal its supposed
illegality. As other courts have noted in somewhat analogous
cases on tax liens, once Keohane knew of the levy, “nothing
prevented him from recognizing the potential injury at that
time, nor would later events provide any greater insight into
his possible cause of action.” Macklin v. United States, 300
F.3d 814, 824 (7th Cir. 2002). The continuing violation
doctrine does not apply here.
In sum, the two-year statute of limitations on Keohane’s
cause of action began to run no later than June 2005, after he
received notice of the levy on his Social Security benefits.
9
Because Keohane did not sue until December 2008, more than
three years after he received notice of the levy, his claim is
barred.
* * *
One final piece of housekeeping. The District Court
interpreted the statute of limitations in Section 7433(d)(3) as a
jurisdictional bar. See Keohane v. United States, 775 F. Supp.
2d 87, 90 (D.D.C. 2011). We don’t think Section 7433(d)(3)
qualifies as jurisdictional under the Supreme Court’s current
tests. See, e.g., Henderson ex rel. Henderson v. Shinseki, 131
S. Ct. 1197, 1202 (2011) (“a rule should not be referred to as
jurisdictional unless it governs a court’s adjudicatory
capacity, that is, its subject-matter or personal jurisdiction”);
Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237, 1243-44
(2010); Arbaugh v. Y & H Corp., 546 U.S. 500, 515-16
(2006); see also Menominee Indian Tribe of Wis. v. United
States, 614 F.3d 519, 525 (D.C. Cir. 2010). Other courts have
likewise said that the similar exhaustion requirement in
Section 7433(d)(1) is not jurisdictional. See, e.g.,
Hoogerheide v. IRS, 637 F.3d 634, 636 (6th Cir. 2011); see
also Kim v. United States, 632 F.3d 713, 717-19 (D.C. Cir.
2011) (holding Section 7433(d)(1) is an “affirmative
defense”). But because the Government raised the Section
7433(d)(3) argument and because we are affirming dismissal
on that basis, nothing in this case turns on the mistaken
labeling. See, e.g., Sierra Club v. Jackson, 648 F.3d 848, 854
(D.C. Cir. 2011); Fernandez v. Centerplate/NBSE, 441 F.3d
1006, 1009 (D.C. Cir. 2006).
We affirm the judgment of the District Court dismissing
the case.
So ordered.