Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02002/USCOURTS-caed-2_05-cv-02002-8/pdf.json

Parties Involved:
Commissioner of Internal Revenue
Defendant
Joanne R. Scheafnocker
Plaintiff

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

JOANNE R. SCHEAFNOCKER,

Plaintiff, No. CIV S-05-2002 DFL EFB PS

vs.

COMMISSIONER OF INTERNAL

REVENUE

Defendant. ORDER

 /

This action, in which plaintiff is proceeding pro se, was referred to the undersigned

pursuant to Local Rule 72-302(c)(21). Presently before the court is defendant’s request for a

partial stay of this action pending ruling by the Supreme Court in EC Term of Years Trust v.

United States (Case No. 05-1541). Plaintiff has filed no opposition to the request. 

Plaintiff commenced this action in October 2005, alleging that the IRS wrongfully levied

funds from a bank account jointly held by her and her ex-husband, Fred Scheafnocker, at

National City Bank of Pennsylvania. The levy was issued by the IRS to collect trust fund

recovery penalties under IRC § 6672 assessed against Mr. Scheafnocker. Plaintiff alleged that

the IRS improperly seized her property to satisfy the tax liabilities of another, i.e., her exhusband. Defendant argued for dismissal on grounds that the court lacked subject matter

jurisdiction over this action because plaintiff’s exclusive remedy for recovery of the seized funds

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 Those findings and recommendations were issued by Magistrate Judge Gregory G.

Hollows on June 21, 2006. The case was subsequently reassigned to the undersigned on August

29, 2006.

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was a wrongful levy action under 26 U.S.C. § 7426, and that any such claim was barred by the

applicable statute of limitations. On March 28, 2007, the district judge adopted the magistrate

judge’s findings and recommendations and denied defendant’s Rule 12(b)(1) motion to dismiss.1

In denying defendant’s motion, the court acknowledged that, apart from the Ninth

Circuit, “all other circuits that have considered the issue have determined that § 7426 is the

exclusive remedy for third party wrongful levy claims.” See Order (Doc. No. 38). However, the

Ninth Circuit’s contrary ruling in WWSM Investors v. United States, 64 F.3d 456 (9th Cir. 1995)

is controlling here. Under WWSM Investors, a non-taxpayer third party may, in addition to

bringing a claim for wrongful levy under § 7426, pursue an action for refund under 28 U.S.C. §

1346(a)(1) seeking recovery of property wrongfully seized by the IRS. The Supreme Court has

recently resolved that split of authority.

On October 27, 2006, the Supreme Court granted certiorari in EC Term of Years Trust v.

United States, 434 F.3d 807 (5th Cir. 2006), to determine whether a person who is not the

assessed taxpayer can utilize 28 U.S.C. § 1346 to seek a refund when its funds were seized

through a wrongful levy and it had an opportunity to utilize the wrongful levy procedures under

26 U.S.C. § 7426. EC Term of Years Trust v. United States, 434 F.3d 807 (5th Cir. 2006), cert.

granted, 127 S. Ct. 467 (2006). On April 30, 2007, the Court issued an opinion affirming the

Fifth Circuit’s holding that section 7426(a)(1) provides the exclusive remedy for third-party

wrongful levy claims. 

Accordingly, defendant’s request for a stay pending the Court’s decision in EC Term of

Years Trust, is denied. Based on the Court’s apparently dispositive ruling in that case, the

undersigned hereby orders the parties to provide briefing as to the effect of that ruling on this

action. Defendant shall file an appropriate motion and supporting brief within forty-five days of

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the date of service of this order. Plaintiff shall file an opposition thereto within fourteen days

thereafter. Defendant may file a reply within five days following plaintiff’s filing of her

opposition, if any. Upon filing of the reply brief, or if none is filed within five days after

plaintiff’s filing of her opposition, the matter will be deemed submitted on the papers, and no

hearing will be scheduled unless later determined to be necessary by the court. E.D. Cal. L.R.

78-203(h). 

In accordance with the foregoing, IT IS ORDERED that: 

1. Defendant’s request for a stay is denied; 

2. Defendant shall file within forty-five days of service of this order an appropriate

motion and supporting brief addressing the effect of the Supreme Court’s decision in EC Term of

Years Trust v. United States, No. 05-1541 (Apr. 30, 2007), on this action. Plaintiff shall file any

opposition within fourteen days thereafter. Any reply by defendant shall be filed within five

days after filing of plaintiff’s opposition, at which time the matter will deemed submitted on the

papers, and no hearing will be scheduled unless later deemed necessary by the court. E.D. Cal.

L.R. 78-203(h); and 

3. The parties shall be limited in their discovery efforts, if any, only by the Federal Rules

of Civil Procedure. 

DATED: May 1, 2007.

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