## F I LED United States C ourt of Appeals Tenth Circuit 

### O c t ob e r31,2006 Elisab eth A. Shumaker C l erk of C ourt PU BL I SH

UNI TED S TATES CO URT O F AP PEALS

T E N T H C IR C U IT A R T H U R W . M I R E S, T rus t ee of t he M ont e H G ol dm an R evoca bl e Li vi ng T ru st, P lain tiff

- A p p e llan t, v. N o. 05- 6186 UNI T E D S T AT E S OF AM E RI CA ,

D efe ndant - A ppel l ee. AP P EA L F ROM THE UNI TE D S TA TE S DI S TR I CT COURT F O R T H E WE S T E R N D I S T R I C T O F O K L A H O MA

( D. C. NO. CI V- 0 3 - 9 8 2 - R) M a r g a r e tK. M y e r s ( Ea r l D. M i l l s wi th h e ro n t h e b r i e fs ) , Th e M i l l s La w Fi r m, O klahom a C i ty , O klahom a, for Plai nti ffs-A pp el l ants . Jo an I. O p p en h eim er, U n it ed S tat es D ep artm en t of Ju sti ce (E il ee n J. O ’C o n n o r, A ssist an t A tt o rne yG en era l; Jo h n C . R ichter, U n it ed S tat es A tt o rne y ; R icha rd F a rb e r, U n ited S tate s D e p a rtm e n t o f Ju stic e , w ith h e r o n th e b rie f ) fo r D e fe n d a n tA ppel l ee. B efo re KELLY , HOLL OW AY , and M c CO NNELL , C i rcui tJudg es. M c CO NNELL , C i r cui tJ udge.-2-

W h e n th e e sta te o f

A lf re d G o ld m a n (“ th e E sta te” ) filed th is ta x re f u n d su it i n J ul y2003, i thad nei therpai d the t axes i tw as di s put i ng nors ought admi ni s tr at i ve r el i ef be for e the I nt ernal R evenue Ser vi ce. T he U ni t ed St at es a c c o rd in g lyso u g h t d ism iss a l u n d e r R u le 1 2 (b )(1 ) o f th e F e d e ra l R u les o f

C iv il Pr ocedur e forl ack of

s ubj ectm att erj ur i s di ct i on. R atherthan s uffe rdi s m i s s al , t he E stat e p aid th e tax es, fil ed a c lai m b efo re the IR S , an d , w ith the g o v ern m en t’ s cons ent , amended i t s compl ai ntt o al l ege c om pl i ance w i th thes e tw o j ur i s di ct i onal pr er equi s i t es . T he di s tr i ctcourtt hen cons i der ed the pendi ng cr os s - m ot i ons for s um m aryj udgm entand rul ed aga i ns tt he Est at e. A fter losing o n the m erit s, the E stat e n o w ap p ea ls from the d istri ct co u rt ’s j udgm ent , ar gui ng thatthe j udgm enti s voi d beca us e the j ur i s di ct i onal defe ctt hat exi s t ed w hen the s ui tbegan w as i ncur abl e. W e di s agr ee a nd hol d thatundert he c i r c u m s t a n c e s o f

th i s c a s e , th e E s t a t e c u r e d t h e j u r i s d i c t i o n a l d e fe c t . We ther efor e AF F I RM th e d istric t co u rt’s ju d g m e n t. I . St andard of R evi ew T h e E s ta te d o e s n o t c h a lle n g e th e m e ri ts o f th e d is tr ic t c o u rt ’s o rd e r. R ather , i tas ks us t o vaca t e thator deron the gr ounds t hatt he courtl acke d s ubj ect m at t er j uri sdi ct i on . W hethera dis tri ctcou rthad subjectm at t er j uri sdi ct i on i s a q u e s t i o n o f

l a w th a twe r e v i e w de novo . Es tat e of Tre ntadue ex r el . A gui larv. Uni t ed Stat es , 3 9 7 F . 3 d 8 4 0 , 8 5 2 (10 th C ir . 2 0 0 5 ).-3-

I I . St i pul at ed M at eri al F act s and P roce dural H i s t ory T h is case stem s fro m an ea rl ier l aw su itb etw ee n the tw o scio n s to a g roc ery s t or e s hoppi ng cartfor tune. A l fr ed and M ont e G ol dm an, both now dece as ed, w er e the onl ychi l dr en of S. N . G ol dm an. T heyi nher i t ed thei rfather ’ s for tune thr ough var i ous trus t s and bus i nes s ent erpr i s es . T he i nher i t ance pr ovi ded for equal s har es , and the br other s cons i der ed themsel ves equal ow ner s of the var i ous b u s in e s s e s . On e o f th e i rb u s i n e s s e s wa s P r i mc o M a n a g e me n tCo mp a n y , a n Ok l a h o ma corporat i on w ho se st ock w as hel d eq uall ybyt he b rothers’ revocab l e l i ving t rust s. Pr i m co w as the nerve ce nt erfort he G ol dm ans ’ otherbus i nes s es : i tper form ed a d m in istra tiv e se rv ice s s u c h a s b o o k k e e p in g , filin g tax re tu rn s, c o llec tin g re n t, a n d h ir in g a tto rn e y s a n d a c c o u n ta n ts fo r t h e o th e r e n titie s . F o llo w in g th e ir p a re n ts’ d e a th s, M o n te a n d A lf re d ’s r e latio n sh ip d e ter io ra ted u n til A lf re d e v e n tu a llya p p ro p ria ted n e a rlya ll o f th e ir a ss e ts— a p p ro x im a tely$ 2 3 m ill io n — fo r h is p e rso n a l u se . In A p ril 1 9 9 0 , M o n te re sp o n d e d b ysu in g A lf re d a n d v a rio u s P rim c o e m p lo y e e s in O k lah o m a sta te c o u rt . T h e p a rt ie s s e ttle d th a t s u it in J u ly 1 9 9 4 a f te r i n c u rr in g m o re th a n $ 2 .5 m illio n in le g a l fe e s a n d $ 3 5 2 ,5 0 0 in a c c o u n tin g fe e s , a ll o f w h ic h P ri m c o p a id . P ri m c o lis te d th o s e fe e s a s d e d u c tio n s o n its 1 9 9 0 , 1 9 9 1 , a n d 1 9 9 2 ta x re tu rn s . T he I R S di s al l ow ed the l i on’ s s har e of thos e deduc t i ons . T hi s r educe d t he amount of di s tr i but abl e netl os s es t hatA l fr ed G ol dm an coul d cl ai m as a Pr i m coT he di s tr i ctcourts ai d t hat“[t ] he C om pl ai ntw as i ni t i al l yfi l ed on beha l f of 1 s i x trus t s es t abl i s hed forthe bene fi tof M ont e G ol dm an, fi ve trus t s es t abl i s hed for the b enefi tof A l fred G oldm an, and t he E st at e of A l fred G oldm an. A s the case h a s p r o g r e s s e d , i th a s b e c o me a p p a r e n tt h a tt h e P l a i n t i ffs a r e n o w a s s e r t i n g c l a i ms fo r r e f u n d o n ly o n b e h a lf

o f th e e s ta te o f

A lf re d G o ld m a n .” A p p e lla n t’ s A p p . 4 7 . T h e p a rties d o n o t co n tes t th is fin d in g o n a p p e a l. -4- sh a re h o ld e r o n h is 1 9 9 0

– 9 2 tax re tu rn s a n d led to a c o rre sp o n d in g in c re a se in A l fr ed’ s per s onal fede r al i ncome t ax l i abi l i ty . I n 1994, A l fr ed G ol dm an fi l ed amended fede r al t ax r eturns forthos e y ear s and cl ai m ed as per s onal deduct i ons the att orney ’ s fee s and ac count i ng fee s i ncurr ed i n the s t at e courtl i t i gat i on agai ns thi s br other . T he I R S deni ed thos e deduc t i ons and as s es s ed addi t i onal t a x e s a c c o r d i n g l y. A l f r e d t h e n p a s s e d a w a y. I ns t ead of

pay i ng the addi t i onal t axes , the Est at e fi l ed thi s s ui ti n 2003 chal l engi ng the I R S’ s di s al l ow ance of thos e deduct i ons . I n r es pons e t o the 1 g o v e rn m e n t’s m o tio n to d ism iss fo r la c k o f su bjec t m a tter ju risd ictio n , the E sta te t oo k the onlypo ssi ble s t ep to prevent di sm i ssal : i tpaid the taxes ass essed against M r. G o ldm an fo r 19 9 0

– 9 2 an d p eti ti o n ed the IR S fo r a ref u n d o n M r. G o ldm an ’s behal f. T hr ee da y s l at er , the I R S di s al l ow ed the Est at e’ s cl ai m . T he Est at e then m oved forl eave t o fi l e an a m ended c om pl ai ntand j oi nts t i pul at i on of fa ct s . T he di s tr i ctcourtgr ant ed the mot i on, and the compl ai ntand s t i pul at i on w er e amended as fol l ow s: 1. O n oraboutO ct ober22, 2004, Pl ai nt i ff J ul i an P. K or nfel d, P e rso n a l R e p re se n tativ e fo r th e E sta te o f A lf re d D . G o ld m a n , p a id fede r al i ncome t axes as s es s ed aga i ns tA l fr ed D . G ol dm an fort he t ax-5-

y ear s 1990, 1991, and 1992, i n the amount s of $564, 654. 44, $ 3 4 2 , 8 6 6 . 0 3 a n d $ 2 5 1 , 0 4 4 . 3 5 , r e s p e c t i v e l y. 2. O n oraboutO ct ober22, 2004, Pl ai nt i ff J ul i an P. K ornfel d, Per s onal R epr es ent at i ve forthe Est at e of A l fr ed D . G ol dm an, fi l ed [ F o rm ] 1 0 4 0 X , se e k in g a re f u n d o f th e in c o m e tax a ss e ss m e n ts p a id forthe t ax y ear s 1990, 1991, and 1992. 3. B yl ett erdat ed O ct ober25, 2004, the I nt ernal R evenue Ser vi ce di s al l ow ed the C l ai m s forR efund f i l ed on beha l f of A l fr ed D . G ol dm an. 4. T hi s C our tcan now exer ci s e j ur i s di ct i on overthe r efund act i on of A l fr ed D . G ol dm an and hi s E s t at e i n acc or dance w i th 28 U . S . C . S ec ti o n 1 3 4 6 (a)(1). 5. C ouns el forD efe ndantdoes notobj ectt o the amendm entof the C om plai nt ort he JointS t i pu l at i on of F act s. A p p ell ee ’s S u p p . A p p . 9

– 1 0 . T h e d istri ct co u rt ’s ord er g ran ti n g su m m ary ju d g m e n t in fa v o r o f

th e U n ited S tate s re fe rre d to th e stip u late d a m e n d m e n t: T he Pl ai nt i ffs al l ege thatthe al l eged j ur i s di ct i onal defe cthas been “ cur ed” byt he paym entof the di s put ed t axes , and have fi l ed an “A m endmentt o St i pul at i on of M at er i al Fact s N oti n D i s put e” r eci t i ng thatthe t axes as s es s ed aga i ns tA l fr ed D . G ol dm an have now been paid i n fu l l . T he G ov ernm ent does no tdis pu t e t he P l ai nti ffs’ as s ert i on thatthe as s es s ed t axes have now been pa i d, and thus has c u re d th e a ss e rte d ju risd ictio n a l d e fe c t. A ppel l ant ’ s A pp. 63–64. B yal l acc ount s , the Est at e w as s at i s fi ed thatthe di s tr i ct courthad j ur i s di ct i on. T he Est at e adhe r ed t o thi s pos i t i on unt i l the di s tr i ctcour tent er ed j udgm ent on the mer i t s i n favorof the U ni t ed St at es and deni ed the Est at e’ s R ul e 60( b) ( 2) m ot i on forr econs i der at i on bas ed on al l egedl ynew l ydi s cover ed evi dence . W hen the di s tr i ctcourtdeni ed thatm ot i on, the Est at e appe al ed t o thi s C our tand as s ert ed fort he fi r s tt i m e thatthe di s tr i ctcour t ’ s j udgm entw as voi d beca us e ( 1)-6-

th e c o u rt lac k e d ju risd ictio n w h e n th e su it b e g a n , an d (2 ) su b se q u e n t ev e n ts c o u ld n o t c u re th a t ju ri s d ic tio n a l s h o rt c o m in g . I I I . D i s cus s i on Few t enet s of fe der al j ur i s prudence ar e more fi r m l yes t abl i s hed than the pr i nci pl e that“fe der al court s . . . ar e court s of a l i m i t ed j ur i s di ct i on. ” Turne rv. B a n ko f N. A m. , 4 U . S. ( 4 D al l . ) 8, 8 ( 1799) . “Theypos s es s onl yt hatpow er author i zed byC ons t i tut i on and s t atut e . . . . ” Kokkone n v. G uar di an Li f e Ins . C o. o f A m. , 511 U . S. 375, 377 ( 1994) . T o ens ur e i t s A r t i cl e I I I pow eri s exer ci s ed pr oper l y , a fe der al courtm us t , “i n everycas e and a teverys t age of t he pr ocee di ng, s at i s fyi t s el f as t o i t s ow n j ur i s di ct i on. ” C i t iz ens C oncerned f or Separ at i on of

C hur ch and Stat e v. C i t y and C ount

y of D enve r , 628 F. 2d 1289, 1301 ( 10th C i r . 1980) . So w ei ghtyi s t hi s conce rn that“a l i t i gantgener al l ym ay ra ise a c o u rt’s la c k o f su bjec t-m a tter ju risd ictio n a t an ytim e in th e sa m e c iv il a c tio n ”

— e v e n o n a p p e a l, a s th e E s ta te d o e s h e re . Kontr i ck v . Ryan , 540 U . S. 443, 4 5 5 (2 0 0 4 ); s ee als o P r ai r i e Band of P otaw at om iIndi ans v. P i er ce , 253 F. 3d 1234, 1240 ( 10th C i r . 2001) ( “[S] o l ong as a ca s e i s pendi ng, t he i s s ue of feder al courtj ur i s di ct i on m aybe r ai s ed atanys t age of t he pr ocee di ngs ei therbyt he p arti es o r bythe c o u rto n it s o w n m o ti o n . ” (intern al qu o tat ion m ark s o m itted)). T he Est at e i nvoked the di s tr i ctcourt ’ s s ubj ectm at t erj ur i s di ct i on under28 U . S. C . § 1346( a) ( 1) , w hi ch gr ant s di s tr i ctcourt s or i gi nal j ur i s di ct i on i n “[a ] ny c iv il ac tio n a g a in st th e U n ited S tate s fo r th e re c o v e ryo f . . . an ysu m a lleg e d to-7-

have be en exc es s i ve . . . undert he i nt ernal - r evenue l aw s . ” Id. T w o pr er equi s i t es m u st be m et be fo re a d istri ct co u rth as su bject m att er jurisdicti o n u n d er § 1 3 4 6 (a )( 1 ). F ir s t, a p la in tiff m u s t h a v e f

u lly p a id th e c h a lle n g e d ta x a s s e s s m e n t. F l or a v. Uni t ed Stat es , 3 5 7 U .S . 6 3 , 7 5

– 7 6 (1 9 5 8 ); A r dalan v. Uni t ed Stat es , 748 F .2 d 1 4 1 1 , 1 4 1 3 (1 0 th C ir. 1 9 8 4 ). S e c o n d , a p lain tiff m u st h a v e filed a v a lid r efund c l ai m w i th the I R S, and the I R S m us thave de ni ed the cl ai m ors i x m ont hs m us thave pa s s ed s i nce the cl ai m w as fi l ed w i th no I R S r es pons e. 26 U . S. C . §§ 6 5 3 2 (a)(1), 74 2 2 (a). T he Est at e s at i s fi ed thes e tw o r equi r ement s aft erfi l i ng s ui tand pr es um ed thati thad cur ed the obvi ous j ur i s di ct i onal defe ctbydoi ng s o. N ow , aft erl os i ng on the mer i t s , the Est at e ar gues bas ed on McNei lv. Uni t ed Stat es , 508 U . S. 106 ( 1993) , thati tcoul d nothave c ur ed the defect . I n McNe il , the S u p rem e C o u rt aff i r m ed the di s m i s s al of a pr o s e pr i s oner ’ s Feder al T or tC l ai m s A ctcompl ai nt b e c a u se th e p riso n e r e x h a u ste d h is a d m in istra tiv e re m e d ies a f ter fili n g h is c o m p la in t. See i d. a t 1 0 7

– 0 9 . T h e E sta te s u g g e sts th a t McNe ilfor ecl os es the p o s s i b i l i ty o f

c u r i n g a l a c k o f

s u bj e c tm a t t e rj u r i s d i c t i o n d u r i n g a s u i t ’ s p e n d e n c y. W e do notr ead McNe ils o br oadl y . T he Supr eme C our texpr es s l ys t at ed th a t it“ a ss u m e [ d ] th a t . . . n o th in g d o n e b yp e tit io n e r a f ter th e d e n ial o f

h is admi ni s tr at i ve cl ai m . . . cons t i tut ed the comm ence m entof a ne w act i on. ” Id. at 1 1 0 . Th a ts t a t e me n ta l o n e d i s t i n g u i s h e s th i s c a s e f r o m McNe il . Af

t e rth e I RS deni ed M r . G ol dm an’ s r efund c l ai m , he s oughtperm i s s i on t o fi l e— and, w i th the-8-

governm ent ’ s cons entand di s tr i ctcour t ’ s perm i s s i on, di d fi l e— an amended co m p lai n t th at all eg ed co m p let ion o f th e jurisdicti o n al pre req u isi tes. A p p ell ee ’s S u p p . A p p . 9

– 1 0 . T hos e fa ct s m ake thi s cas e more anal ogous t o Mathew s v. D i az , 42 6 U. S. 67, 70 ( 1976) , w hi ch conc erned the cons t i tut i onal i tyof s t atut oryr es i dency re q u ir e m e n ts fo r M e d ic a re e lig ib ility. O n e o f th e M e d ic a re s ta tu te s , 4 2 U .S .C . § 40 5(g), “est abli she[d ] [the] fi l i ng of an app l i cat i on [fo r M edicar e ben efi t s] as a nonw ai vabl e condi t i on of j ur i s di ct i on. ” Id. at75. O ne pl ai nt i ff f i l ed the r equi r ed appl i cat i on onl y“af

t erhe w as j oi ned i n the ac t i on. ” Id. T h e S u p rem e C o u rt “ha[ d] l i t t l e di ffi cul ty ” di s pos i ng of the governm ent ’ s m ot i on t o di s m i s s for fa ilu re to e x h a u st a d m in istra tiv e re m e d ies , b e c a u se th e p lain tiff “ sa tisfied th is condi t i on w hi l e the ca s e w as pendi ng i n the D i s tr i ctC our t . ” Id. T h e C o u rt expl ai ned: A s uppl ement al compl ai nti n the D i s tr i ctC our tw oul d have e lim in a ted th is ju risd ictio n a l issu e ; sin c e th e re c o rd d isc lo se s, b o th byaff i davi tand s t i pul at i on, thatthe j ur i s di ct i onal condi t i on w as sa tisfied , itis n o t to o late , ev e n n o w , to s u p p lem e n t th e c o m p lain t to al l ege thi s fac t . U nderthes e ci r cumst ance s , w e tr eatthe pl eadi ngs as properl ysupp l em ented bythe S ecret ary ’s st i pu l at i on that Espinosa had fi l ed an appl i cat i on. Id. T h ese sam e c o n side rati o n s co m p el us to h o ld tha t M r. G o ldm an ’s r epr es ent at i ve cur ed the j ur i s di ct i onal defi ci encyw hi l e hi s s ui tw as pendi ng by pay i ng the out s t andi ng t axes , s eeki ng admi ni s tr at i ve r el i ef f r om the I R S, and-9-

am en d ing h is co m p lai n t ( w ith the g o v ern m en t’ s co n sen t and d istri ct co u rt ’s p e rm is s io n ) t o a lle g e s a tis fa c tio n o f th e ju ri s d ic tio n a l p re re q u is ite s . W e re c o g n ize th a t “[ t]h e e x iste n c e o f fe d e ra l ju risd ictio n o rd in a rily depends on t he fa ct s as t heyexi s tw hen the compl ai nti s fi l ed. ” New m an- G r een, In c . v. A lfo n zo -L a rr a in , 490 U . S. 826, 830 ( 1989) . B utl i ke mostrul es , “thi s one i s s us cept i bl e t o exce pt i ons . ” Id. O n e su ch ex ce p ti o n arises w h en a d istri ct co u rt al l ow s an am end m ent bythe p art i es t o cu re an exh aust i on problem

— the p reci se s i tuat i on i n D i az , 4 2 6 U .S . at 7 5 ; D uplan v. Har per , 188 F. 3d 1195, 1199–1200 ( 10th C i r . 1999) ; and her e. O f c o u rse , this e x c e p tio n d o e s n o t m e a n th a t p lain tiffs s h o u ld h a b itu a lly n e g lec t S e c tio n 1 3 4 6 (a )(1 )’s m a n d a tes b e fo re fili n g su it. L ik e th e S u p re m e C o u rt, w e expe ctthati n futur e ca s es , “the r i s k thata l aw y erw i l l be unabl e t o under s t and the exha us t i on r equi r ementi s vi r tual l ynonexi s t ent . ” McNe il , 5 0 8 U .S . a t 1 1 3 . W e hol d onl ythat , underthe ci r cumst ance s of thi s cas e, the Est at e cur ed the obvi ous l ack of

s ubj ectm att erj ur i s di ct i on pr es entw hen the s ui tbegan. F i n a l l y , t h o u g h “ l a c k o f fe d e r a l j u r i s d i c t i o n c a n n o tb e wa i v e d o ro v e r c o me byan agr eementof the part i es , ” Mi t chel lv. Maur er , 2 9 3 U . S . 2 3 7 , 2 4 4 (19 3 4 ), th e E s t a t e ’ s a r g u m e n t s i m p r e s s u s a s p a r t i c u l a r l y s p e c i o u s . T h e E s t a t e ’ s a t t o rn e ys r epr es ent ed t o the di s tr i ctcourt( i n a pl eadi ng s ubj ectt o R ul e 11 of the Feder al R ul es of C i vi l Pr ocedur e) t hati tcoul d “now exer ci s e j ur i s di ct i on overthe r efund act i on of A l fr ed D . G ol dm an and hi s E s t at e i n acc or dance w i th 28 U . S. C . Sect i on-10-

1346( a) ( 1) ” bec aus e M r . G ol dm an’ s r epr es ent at i ve had pa i d the t axes and fi l ed for a refund . A pp el l ee’s S up p. A pp . 10 . B ecause subj ectm at t er j uri sdi ct i on i s a ques t i on of l aw , appel l ant s ar e notj udi ci al l yes t opped fr om advoca t i ng t he d ia m e tr ic a lly o p p o s ite p o s itio n b e fo re th is C o u rt . See Kais erv. B ow l en , 455 F. 3d 1197, 1204 ( 10th C i r . 2006) . B uta hea vydos e of s kept i ci s m i s i n or derw hen, aft erl os i ng on t he mer i t s , a partyappea l s and r ever s es cour s e on a l egal pos i t i on it s u c c e s s f

u lly m a in ta in e d in th e d is tr ic t c o u rt . W e AF F I RM th e ju d g m e n t o f th e d istric t co u rt.