Court Opinion

ID: 4282375
Source: CourtListenerOpinion
Date Created: 2018-06-07 20:00:24.296118+00
Date Added: 2024-06-11T14:26:47.339698
License: Public Domain

United States Court of Appeals
                        For the First Circuit

No. 17-1601

                       INTERNAL REVENUE SERVICE,

                         Defendant, Appellant,

                                  v.

                        WILLIAM CHARLES MURPHY,

                         Plaintiff, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF MAINE

              [Hon. D. Brock Hornby, U.S. District Judge]

                                Before

                         Lynch, Circuit Judge,
                      Souter, Associate Justice,*
                       and Stahl, Circuit Judge.

     Peter Sklarew, with whom David A. Hubbert, Acting Assistant
Attorney General, Paul A. Allulis, Gilbert S. Rothernberg, Thomas
J. Clark, Attorneys, Tax Division, Department of Justice, and
Halsey B. Frank, United States Attorney, were on brief, for
appellant.
     John H. Branson, with whom Branson Law Office, P.A., was on
brief, for appellee.

     * Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
June 7, 2018
              STAHL, Circuit Judge. In this case, we need to determine

whether   an       employee    of    the     Internal      Revenue    Service     ("IRS")

"willfully         violate[d]"      an      order    from    the     bankruptcy    court

discharging the debts of debtor-taxpayer William C. Murphy, as

that   term        is   used   in    26     U.S.C.   § 7433(e).         After     careful

consideration, we hold that an employee of the IRS "willfully

violates"      a    discharge       order    when    the    employee    knows     of   the

discharge order and takes an intentional action that violates the

order.    Under § 7433(e), the IRS's good faith belief that it has

a right to collect the purportedly discharged debts is not relevant

to determining whether it "willfully violate[d]" the discharge

order.    Because the IRS's actions in this case meet this standard,

we affirm.

                                                I.

              On October 13, 2005, Murphy filed a Chapter 7 petition

in the United States Bankruptcy Court for the District of Maine.

On Schedule E of his bankruptcy petition, Murphy listed his income

tax obligations to the IRS for the years of 1993-1998, 2000, 2001,

and 2003, as well as a 2003 tax obligation to the Maine Revenue

Services.          Murphy's tax obligations were by far the largest

liabilities he sought to discharge. In his petition, Murphy listed

total liabilities of $601,861.61, of which $546,161.61 were tax

obligations.            On   January      20,    2006,     Assistant    U.S.    Attorney

                                            - 3 -
Frederick Emery, Jr. ("AUSA Emery") filed an appearance on behalf

of the IRS in the bankruptcy proceeding.

            On   February     14,    2006,    the    bankruptcy    court    granted

Murphy a discharge.         The discharge order, which appears to be a

standard form, reads:

            It appearing that the debtor is entitled to a
            discharge,

            IT IS ORDERED:

            The debtor is granted a discharge under
            section 727 of title 11, United States Code,
            (the Bankruptcy Code).

Beneath the bankruptcy judge's signature, there is a notice that

states, in bold and capital letters, "SEE THE BACK OF THIS ORDER

FOR IMPORTANT INFORMATION."            The back of the order provides an

explanation of bankruptcy discharge in a Chapter 7 case, stating

that "[t]he discharge prohibits any attempt to collect from the

debtor a debt that has been discharged."               The order lists "[s]ome

of   the   common   types    of     debts    which   are   not   discharged"     and

specifically     notes      that    "[d]ebts     for    most     taxes"    are   not

discharged.

            It does not appear that the IRS objected to Murphy's

discharge prior to the bankruptcy court entering its discharge

order.     On February 16, 2006, the IRS received notice of the

discharge order.

                                       - 4 -
            The IRS did not believe that the discharge relieved

Murphy of his tax obligations.              Rather, the IRS viewed Murphy's

taxes as excepted from discharge under 11 U.S.C. § 523(a)(1)(C),

which    excepts    from    discharge   any    tax    if   "the    debtor    made   a

fraudulent return or willfully attempted in any manner to evade or

defeat such tax."            Based on its earlier investigations into

Murphy, the IRS believed that Murphy had willfully attempted to

evade taxes during all of the years in question.

            From February 2006 to February 2009, the IRS repeatedly

informed Murphy that it did not view his tax obligations as

discharged and that it planned to collect what it believed was

owed.    On February 20, 2009, the IRS issued levies against several

insurance companies with which Murphy then did business in an

attempt to collect on these tax obligations.                 Margurite Gagne, a

revenue officer for the IRS, signed the levy notices sent to the

insurance companies.

            On     August    14,    2009,    Murphy      filed    an     adversarial

proceeding seeking a declaration that his tax obligations from

1993-1998, 2000, and 2001 had been discharged. In this proceeding,

AUSA Emery represented the IRS.             According to the IRS, AUSA Emery

"took only minimal discovery in the case" and failed to submit

evidence to the bankruptcy court that the IRS had developed during

its investigation into Murphy's tax obligations.                  Instead, the IRS

claims   that    AUSA   Emery      merely   filed    a   summary    of    the   IRS's

                                       - 5 -
allegations     of    Murphy's   tax    evasion,    without       submitting     any

admissible evidence to support the allegations.

           On June 22, 2010, the bankruptcy court granted summary

judgment   in    Murphy's    favor      and    declared    that     Murphy's     tax

obligations had been discharged.          The bankruptcy court later noted

that it granted summary judgment in large part because the IRS's

opposition to summary judgment "fell far short of applicable

substantive     and   procedural     standards."     Murphy    v.    IRS   (In   re

Murphy), No. 05-22363, 2013 WL 6799251, at *2 (Bankr. D. Me. Dec.

20, 2013).      The IRS did not appeal the bankruptcy court's 2010

summary judgment ruling.

           Subsequently,         AUSA     Emery      was      diagnosed        with

frontotemporal dementia ("FTD").              According to the IRS, symptoms

of FTD include "impairment of executive function, such as the

cognitive skill of planning and organizing." Based on AUSA Emery's

medical records and the opinions of three physicians, the IRS

believes that AUSA Emery was already experiencing the symptoms of

FTD in 2010.

           In February 2011, Murphy filed a complaint against the

IRS under § 7433(e), alleging that an employee of the IRS willfully

violated the bankruptcy court's 2006 discharge order in February

2009 by issuing levies against the insurance companies with which

he did business and thereby attempting to collect on his discharged

                                       - 6 -
tax obligations.1          The IRS responded that it did not willfully

violate    the     order    because      it     reasonably     believed      his   tax

obligations were excepted from discharge under § 523(a)(1)(C)

based on its investigation into his alleged tax evasion.

            On     December   20,     2013,     the   bankruptcy     court    granted

summary judgment for Murphy for his § 7433(e) claim.                      The court

found that the term "willfully violates" has an established meaning

in the context of violations of automatic stays and discharge

orders    issued    in    bankruptcy     proceedings:      a   willful    violation

occurs "when, with knowledge of the discharge, [a creditor] intends

to take an action, and that action is determined to be an attempt

to collect a discharged debt."            In re Murphy, 2013 WL 6799251, at

*7.   The court further found that the 2010 summary judgment ruling

collaterally estopped the IRS from relitigating whether Murphy's

tax obligations were discharged, whether the IRS knew they were

discharged,      and     whether    it   took    actions     which   violated      the

discharge order.         Id. at *8.

            After the bankruptcy court denied the IRS's motion for

reconsideration, the IRS appealed to the district court, which

vacated the bankruptcy court's decision.                IRS v. Murphy, 564 B.R.
96, 98 (D. Me. 2016).              The district court concluded that the

bankruptcy court should have considered AUSA Emery's impairment

      1 Prior to filing his complaint, Murphy exhausted                            his
administrative remedies as required by 26 U.S.C. § 7433(1).

                                         - 7 -
before finding that the 2010 summary judgment ruling collaterally

estopped the IRS from relitigating issues related to Murphy's

discharge.     Id. at 112.

             However, the district court agreed with the bankruptcy

court's definition of "willfully violates" as used in § 7433(e).

Id. at 106.       The district court found that, by 1998, the term had

an established meaning in the context of violations of both

automatic     stays     and    discharge      injunctions,     and       under   this

established meaning, a creditor's "good faith belief in a right to

the property is not relevant to a determination of whether the

violation was willful."            Id. (quoting Fleet Morg. Grp., Inc. v.

Kaneb, 196 F.3d 265, 269 (1st Cir. 1999)).

             On    remand,    the    parties      entered    into    a    settlement

agreement,        whereby    the    IRS    waived   its     collateral      estoppel

arguments and accepted that the 2010 summary judgment ruling

conclusively determined that Murphy's tax obligations had been

discharged.       The IRS reserved the right:

             for further appeal(s) only its arguments that
             that [sic] a debtor is not entitled to damages
             where a creditor's violation of the discharge
             reflects a reasonable belief that the debt
             involved was excepted from discharge, and/or
             that the "willfully violates" language in IRS
             § 7433(e) should be construed to permit the
             IRS to defend against liability for violating
             the discharge on the basis that its employee
             reasonably believed that the tax involved is
             excepted from discharge [hereinafter "the
             willfully violates issue"].

                                          - 8 -
As part of the settlement, the IRS agreed to pay $175,000 as

Murphy's damages once it had exhausted the reserved right to appeal

if the appeal was lost.       The settlement did not "resolve whether

or not the deficiencies in in [sic] the United States' response to

plaintiff's motion for summary judgment . . . were caused by any

mental disability of the former Assistant United States Attorney

at the time of the summary judgment proceedings."            Based on this

agreement, on January 4, 2017, the bankruptcy court entered final

judgment against the United States, and the district court affirmed

the judgment on appeal.      The IRS timely appeals to this court.2

                                     II.

           We   are,   at   this   stage,   confronted    solely    with   the

bankruptcy court's resolution of a legal question, which we review

de novo.   Wilding v. CitiFinancial Consumer Fin. Servs., Inc., (In

re Wilding), 475 F.3d 428, 430 (1st Cir. 2007).               The parties'

settlement agreement reserved for the IRS the right to appeal only

the   bankruptcy   court's   construction     of   the   phrase    "willfully

violates" as used in § 7433(e).

      2Section 7433(e) allows a debtor "to recover damages against
the United States." (emphasis added). As the district court noted
in its September 7, 2016 decision, it appears that the United
States, and not the IRS, "is the real party in interest" in this
case. Murphy, 564 B.R. at 98 n.1. "Like the appellant's brief,
however, for simplicity" we will refer "to the appellant as 'the
IRS.'" Id.

                                    - 9 -
             The    IRS   argues   it    does    not    "willfully   violate"   an

automatic stay or discharge order if it has a good faith belief

that its actions do not violate the bankruptcy court's order.                   In

support of its position, the IRS presents two somewhat conflicting

arguments.         First,   it   claims    that,       before   Congress   enacted

§ 7433(e) in 1998, all creditors could raise a good faith defense

to allegations that they willfully violated an automatic stay or

discharge order.          Second, it posits that even if most creditors

could not raise a good faith defense, such a defense must be

available to the IRS because § 7433(e) is a waiver of sovereign

immunity that must be construed narrowly.

             We begin our interpretation of § 7433(e) "where all such

inquires must begin: with the language of the statute itself."

Ransom v. FIA Card Servs., N.A., 562 U.S. 61, 69 (2011) (quoting

United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989)).

Section 7433(e) provides that:

             If, in connection with any collection of
             Federal tax with respect to a taxpayer, any
             officer or employee of the Internal Revenue
             Service willfully violates any provision of
             section 362 (relating to automatic stay) or
             524 (relating to effect of discharge) of title
             11, United States Code (or any successor
             provision), . . . such taxpayer may petition
             the bankruptcy court to recover damages
             against the United States. (emphasis added).

Congress did not define "willfully" or the phrase "willfully

violates" as used in § 7433(e).           "[W]e attribute to words that are

                                        - 10 -
not defined in the statute itself their ordinary usage, while

keeping in mind that meaning can only be ascribed to statutory

language if that language is taken in context."            Brady v. Credit

Recovery Co., Inc., 160 F.3d 64, 66 (1st Cir. 1998).

             "The statutory term 'willfully' is a chameleon."       United

States v. Marshall, 753 F.3d 341, 345 (1st Cir. 2014).                   At a

minimum,     "willfully"     "differentiates     between   deliberate     and

unwitting conduct."         Bryan v. United States, 524 U.S. 184, 191

(1998); see also McLaughlin v. Richland Shoe Co., 486 U.S. 128,

133 (1988) ("In common usage the word 'willful' is considered

synonymous    with   such    words   as   'voluntary,'   'deliberate,'    and

'intentional.'").      In criminal law, it "typically refers to a

culpable state of mind," such that a "willful violation" occurs

only when a defendant "act[s] with knowledge that his conduct [is]

unlawful."     Bryan, 524 U.S. at 191-92.       In contrast, "[c]ivil use

of the term . . . typically presents neither the textual nor the

substantive reasons for pegging the threshold of liability at

knowledge of wrongdoing."        Safeco Ins. Co. of Am. v. Burr, 551
U.S. 47, 57 n.9 (2007).

             In sum, as the Supreme Court has repeatedly stated,

"'willfully' is a 'word of many meanings whose construction is

often dependent on the context in which it appears.'"            Id. at 57

(quoting Bryan, 524 U.S. at 191); see also Ratzlaf v. United

States, 510 U.S. 135, 141 (1994); United States v. Murdock, 290

                                     - 11 -
U.S. 389, 394-95 (1933).        We look then to the context in which the

word "willfully" appears in § 7433(e) to ascertain its meaning.

            Section 7433(e) directly links the phrase "willfully

violates" to two pre-existing sections of the Bankruptcy Code:

section 362, which addresses automatic stays, and section 524,

which addresses discharges and discharge orders.               "We generally

presume    that    Congress     is   knowledgeable    about    existing     law

pertinent to the legislation it enacts."           Goodyear Atomic Corp. v.

Miller,    486 U.S. 174,   184-85   (1988).     This     presumption    is

particularly appropriate when the new legislation invokes and

builds off an existing statutory framework. See, e.g., Trans World

Airlines, Inc. v. Thurston, 469 U.S. 111, 126 (1985).                We turn

then to examine how courts had interpreted sections 362 and 524 of

the Bankruptcy Code in the years before Congress enacted § 7433(e),

looking first at violations of automatic stays and then turning to

violations of discharge orders.

                                      III.

                                       A.

            The automatic stay is "one of the fundamental debtor

protections provided by the bankruptcy laws."          Midlantic Nat. Bank

v. N.J. Dept. of Envtl. Prot., 474 U.S. 494, 503 (1986) (quoting

S. Rep. No 95-989, p. 54 (1978); H.R. Rep No. 95-595, p. 340

(1977)).    "The stay gives a 'breathing spell' to the debtor and

stops 'all collection efforts, all harassment, and all foreclosure

                                     - 12 -
actions.'"      Tringali v. Hathaway Mach. Co., Inc., 796 F.2d 553,

562 (1st Cir. 1986) (quoting H.R. Rep. No. 95-595, p. 340)).

             Congress enacted then-section 362(h) of the Bankruptcy

Code in 1984 to provide a private cause of action to "[a]n

individual injured by any willful violation of a stay . . . ."                  11

U.S.C. § 362(h) (West 1998); see Vahlsing v. Comm. Union Ins. Co.,

Inc., 928 F.2d 486, 489 n.1 (1st Cir. 1991).3 Before this provision

was added to the Bankruptcy Code, some courts had imposed sanctions

for   willful    violations    of    automatic    stays   "pursuant       to    the

authority of bankruptcy courts to order parties in contempt."

Crysen/Montenay     Energy    Co.    v.    Esselen   Assocs.,   Inc.      (In   re

Crysen/Montenay Energy Co.), 902 F.2d 1098, 1104 (2d Cir. 1990).

For this reason, the standard courts had used for evaluating

whether a violation was willful was the standard that "governed

contempt proceedings: a party generally would not have sanctions

imposed . . . as long as it had acted without maliciousness and

had had a good faith argument and belief that its actions did not

violate the stay."      Id.        However, because § 362(h) created "an

independent statutory basis" to hold violators of the automatic

stay liable, courts began to apply "a standard less stringent than

maliciousness or bad faith to govern the imposition of sanctions

in bankruptcy cases."        Id.

      3A similar      provision      can   be   found   today   at   11   U.S.C.
§ 362(k)(1).

                                     - 13 -
            Prior to the enactment of § 7433(e), nearly all courts,

and a majority of the circuits, had held that a willful violation

of an automatic stay under § 362(h) occurs when an individual knows

of the automatic stay and takes an intentional action that violates

the automatic stay.      See, e.g., Jove Eng'g, Inc. v. IRS (In re

Jove Eng'g, Inc.), 92 F.3d 1539, 1555 (11th Cir. 1996); Price v.

United States (In re Price), 42 F.3d 1068, 1071 (7th Cir. 1994);

In re Crysen/Montenay Energy Co., 902 F.2d at 1105; Cuffee v. Atl.

Bus & Cmty. Corp. (In re Atl. Bus. & Cmty. Corp.), 901 F.2d 325,

329 (3d Cir. 1990); Knaus v. Concordia Lumber Co. (In re Knaus),

889 F.2d 773, 775 (8th Cir. 1989); Goichman v. Bloom (In re Bloom),

875 F.2d 224, 227 (9th Cir. 1989); Budget Serv. Co. v. Better Homes

of Am., 804 F.2d 289, 292-93 (4th Cir. 1986). These courts refused

to incorporate a bad faith or maliciousness requirement, and in

fact many specifically rejected good faith defenses.                  In re

Crysen/Montenay Energy Co., 902 F.2d at 1104-05; In re Atl. Bus.

& Cmty. Corp., 901 F.2d at 329; see also Pinkstaff v. United States

(In re Pinkstaff), 974 F.2d 113, 115 (9th Cir. 1992) ("As it is

undisputed that the IRS acted with knowledge of the bankruptcy

filing,    it   necessarily   follows   that   the   government   willfully

violated    the   automatic   stay."    (internal    quotation    marks   and

citations omitted)).

            Contemporary versions of leading bankruptcy treatises

defined a "willful violation" of the automatic stay in the same

                                  - 14 -
manner.   See George M. Treister et al., Fundamentals of Bankruptcy

Law (4th ed. 1996) § 5.01(c) ("A willful violation of the stay .

. . does not require an intent to violate nor an awareness that

the conduct was prohibited by the stay.             It suffices that the

violator knew of the existence of the stay, i.e., that he knew of

the pendency of the bankruptcy, and that he intentionally did the

violating act."); David G. Epstein et al., Bankruptcy (1992) § 3-

33(c) ("A specific intent to violate the stay is not required, or

even an awareness by the creditor that her conduct violates the

stay.   It is sufficient that the creditor knows of the bankruptcy

and engages in deliberate conduct that, it so happens, is a

violation of the stay.").        These contemporary sources further show

that the phrase "willful violation" had a generally accepted

meaning at the time Congress enacted § 7433(e).               See Hamilton v.

Lanning, 560 U.S. 505, 515-16 (2010) (considering circuit court

decisions and contemporary bankruptcy treatises when interpreting

undefined term in the Bankruptcy Code).

            The   IRS   claims    that   before   1998,   a    few   circuits,

including this circuit, had adopted a "less stringent standard"

that allowed alleged violators to raise a good faith defense.              We

disagree.    The three circuit court decisions cited by the IRS do

not provide an alternative definition of the phrase "willful

violation." Nelson v. Taglienti (In re Nelson), 994 F.2d 42, 45

(1st Cir. 1993); Andrews Univ. v. Merchant (In re Merchant), 958

                                    - 15 -
F.2d 738, 742 (6th Cir. 1992); Sherk v. Tex. Bankers Life & Loan

Ins. Co. (In re Sherk), 918 F.2d 1170, 1178 (5th Cir. 1990)

abrogated on other grounds by Taylor v. Freeland & Kronz, 503 U.S.
638, 643 (1992).      Rather, these three decisions all appear to be

limited   resolutions    of    idiosyncratic    fact   patterns,    with    two

arising in the context of domestic relations, see In re Nelson 994
F.2d at 45; In re Sherk, 918 F.2d at 1178, without a broader

analysis of the meaning of "willful violation."            Indeed, in In re

Nelson, we avoided adopting a particular definition of "willful

violation" by specifically limiting our holding to "the peculiar

'facts' of th[e] case." 994 F.2d at 45.4

           A   review    of     cases    from     within   these    circuits

demonstrates   that    these    three   decisions   did    not   announce    an

alternative "less stringent standard" for violations of automatic

stays.    Even after these decisions were issued, courts continued

to apply the generally accepted definition of "willful violation"

and rejected good faith defenses.           See, e.g., Stmima Corp. v.

Carrigg (In re Carrigg), 216 B.R. 303, 305 (B.A.P. 1st Cir. 1998);

Shadduck v. Rodolakis, 221 B.R. 573, 577, 582-83 (D. Mass. 1998)

     4 As Murphy correctly notes in his brief, when we later adopted
the generally accepted definition of "willful violation" for
violations of automatic stays in Fleet Mortgage Group, Inc. v.
Kaneb, we did not reference any departure from our prior precedent.
In fact, we adopted the generally accepted definition because we
"decline[d] to create a new standard for willfulness. Fleet Mortg.
Grp., Inc., 196 F.3d at 268.

                                   - 16 -
(finding willful violation of automatic stay by IRS despite its

argument that it acted in good faith); In re Walker, 168 B.R. 114,

121 (E.D. La. 1994) ("Willfulness is not measured by specific

intent to violate a court order . . . ."); In re Timbs, 178 B.R.
989, 997 (Bankr. E.D. Tenn. 1994) ("[A] good faith mistake of the

law, a legitimate dispute as to legal rights or even good faith

reliance on an attorney's advice do[es] not relieve a willful

violator from the consequences of his act."); Smith v. GTE N. Inc.

(In re Smith), 170 B.R. 111, 115, 117 (Bankr. N.D. Ohio 1994) (no

good faith defense to willful violation of automatic stay).

           The IRS also points to the Third Circuit's decision in

University Medical Center v. Sullivan (In re University Medical

Center), 973 F.2d 1065 (3d Cir. 1992) as an example of a court

adopting a good faith defense for willful violations of automatic

stays.   It is true that, if read broadly, In re University Medical

Center could allow a creditor to raise a good faith defense in any

situation where existing law leads a creditor to reasonably believe

"its actions to be in accord with the stay."              Id. at 1088.5

However,   pre-1998   decisions    from    within   the   Third   Circuit

demonstrate that courts did not read In re University Medical

     5 One judge dissented from this part of In re University
Medical Center, stating that he would have found a willful
violation of the automatic stay because the Third Circuit had
already "explicitly rejected good faith as a defense to
'willfulness.'" 973 F.2d at 1089 (Becker, J., concurring in part
and dissenting in part).

                                  - 17 -
Center so broadly.     In a decision issued only eight months after

In   re   University   Medical   Center,   the   Third   Circuit   itself

reaffirmed that "[w]illfulness does not require that the creditor

intend to violate the automatic stay provision" and that "a

creditor's 'good faith' belief that he is not violating the

automatic stay provision is not determinative of willfulness under

§ 362(h)."    Lansdale Family Rests., Inc. v. Weis Food Serv. (In re

Lansdale Family Rests., Inc.), 977 F.2d 826, 829 (3d Cir. 1992)

(citing In re Univ. Med. Ctr., 973 F.2d at 1087-88).          And, in a

case involving a taxpayer's suit against the IRS, the Bankruptcy

Court for the Middle District of Pennsylvania rejected the IRS's

argument that it relied in good faith on existing procedure set

out in the IRS manual, concluding that "[e]ven a good faith belief

that a party is not violating a stay is insufficient to escape

liability."     Weisberger v. United States (In re Weisberger), 205
B.R. 727, 731 (Bankr. M.D. Pa. 1997) (citing In re Univ. Med. Ctr.,
973 F.2d at 1088).

             In sum, we find the phrase "willful violation" had an

established meaning in the context of violations of automatic stays

as of 1998:     a creditor willfully violated the automatic stay if

it knew of the automatic stay and took an intentional action that

violated the automatic stay.      A good faith belief in a right to

the property was not relevant to determining whether the creditor's

violation was willful.

                                 - 18 -
                                 B.

          A discharge order issued pursuant to § 524(a) generally

"relieves a debtor from all pre-petition debt" and "permanently

enjoins creditor actions to collect discharged debts."     Bessette

v. Acvo Fin. Servs., Inc., 230 F.3d 439, 444 (1st Cir. 2000).    In

this way, the discharge order is designed "to ensure that debtors

receive a 'fresh start' and are not unfairly coerced into repaying

discharged prepetition debts."    Pratt v. Gen. Motors Acceptance

Corp. (In re Pratt), 462 F.3d 14, 19 (1st Cir. 2006); see also

Hardy v. United States (In re Hardy), 97 F.3d 1384, 1388-89 (11th

Cir. 1996) (discussing how § 524 "embodies the 'fresh start'

concept of the bankruptcy code").

          By 1998, bankruptcy courts had relied on their equitable

powers, granted by § 105(a), to sanction parties that willfully

violated discharge orders,   see Bessette, 230 F.3d at 445 (citing

In re Hardy, 97 F.3d at 1389; In re Elias, 98 B.R. 332, 337 (N.D.

Ill. 1989); Matthews v. United States (In re Matthews), 184 B.R.
594, 598 (Bankr. S.D. Ala. 1995)), and had begun to apply the same

generally accepted definition of "willful violation" used for

violations of automatic stays to violations of discharge orders.

In In re Hardy, the Eleventh Circuit used the same willfulness

definition when determining whether the IRS violated a debtor's

discharge order. 97 F.3d at 1390.    Other bankruptcy courts from

outside the Eleventh Circuit followed its lead.    See In re Hill,

                              - 19 -
222 B.R. 119, 122-23 (Bankr. N.D. Oh. 1998); In re Lovato, 203
B.R. 747, 749 (Bankr. D. Wyo. 1996); see also Behrens v. Woodhaven

Ass'n, 87 B.R. 971, 976 (Bankr. N.D. Ill. 1988), aff'd, No. 83 B

4896, 1989 WL 47409 (N.D. Ill. Mar. 8, 1989) (finding willful

violation of discharge order in case before In re Hardy when

creditor sued debtor on a prepetition contract "with full knowledge

of the Debtors' Chapter 7 case and discharge").

          As   Murphy    concedes,    fewer     courts   had   addressed   the

standard for willful violations of discharge orders by 1998 than

those that had discussed the meaning in the context of automatic

stays and § 362(h).      However, we find that when Congress enacted

§ 7433(e), it sought to apply the same generally accepted standard

to violations of both automatic stays and discharge orders.

          First,   the    plain      language    of   § 7433(e)    does    not

distinguish between the two orders.        The object of the verb/adverb

combination "willfully violates" in § 7433(e) is "any provision of

section 362 (relating to automatic stay) or 524 (relating to effect

of discharge) . . . ."     Based on this structure, it would seem odd

to imbue "willfully violates" with two different meanings, one for

automatic stays and one for discharge orders.

          Second, preexisting provisions of the Tax Code already

allowed the IRS to raise its good faith belief, not as a defense

to liability, but as a means of mitigating damages.                 Under 26

U.S.C. § 7430, a taxpayer who "prevails" in an action against the

                                  - 20 -
IRS may recover reasonable attorney's fees.            However, there is an

exception to this rule: a taxpayer will not be treated as the

prevailing    party    "if   the   United    States   establishes   that   the

position   of    the   [IRS]   in    the    proceeding   was   substantially

justified."     26 U.S.C. § 7430(c)(4)(B).

             Section 7430(c)(4)(B) was already in place in 1998, see

26 U.S.C. § 7430(c)(4)(B) (West 1998), and similar protections had

been in place since 1982, see 26 U.S.C. § 7430(c)(2)(A) (West 1982)

(party not a prevailing party against the United States unless it

"establishes that the position of the United States in the civil

proceeding was unreasonable"); Kaufman v. Egger, 758 F.2d 1, 3-4

(1st Cir. 1985).         As the bankruptcy court recognized below,

§ 7430(c)(4)(B) "acknowledges that liability under the Code may

flow from good faith actions of the IRS, but that 'substantial

justification' may mitigate the damages available to the aggrieved

party."    In re Murphy, 2013 WL 6799251, at *9 (emphasis added);

see also Kovacs v. United States, 739 F.3d 1020, 1026 (7th Cir.

2014) (discussing interplay between § 7430 and § 7433(e)).             While

the IRS cannot rely on its good faith belief that it could collect

from Murphy as a defense to liability, it can invoke its good faith

belief to limit Murphy's recovery to his actual damages.6

     6In this case, the IRS has stipulated to the amount of damages
as a part of the settlement agreement.

                                    - 21 -
             For    the    foregoing    reasons,   we   find    that    "willful

violation" had an established meaning in 1998 and that Congress

used that established meaning in § 7433(e) to set the standard for

evaluating    violations       of   both   automatic    stays   and    discharge

orders.

                                        IV.

             Although we rely primarily on Congress's contemporary

understanding of the phrase "willful violation" in construing

§ 7433(e),         post-1998    decisions       from    this    circuit      and

administrative materials from the IRS confirm that the generally

accepted definition of willful violation should control.

             Since 1998, this circuit has adopted the same definition

of "willful violation" for violations of both automatic stays and

discharge orders.         In Fleet Mortgage Group, Inc. v. Kaneb, issued

only one year after § 7433(e) was enacted, we explicitly adopted

the generally accepted definition for violations of automatic

stays. 196 F.3d at 268-69.       Subsequently, in In re Pratt, we used

the same standard to evaluate whether a violation of a discharge

order was willful. 462 F.3d at 21.      We stressed that Kaneb had

"rejected the proposition that a stay violation could not be

actionable (viz., 'willful') if the creditor had made a good faith

mistake."     Id.    We then held that the creditor in Pratt willfully

violated the discharge order because the creditor:

                                       - 22 -
          ha[d] not suggested -- nor could it plausibly
          do so on these record facts -- that it did not
          know of the existence of the [debtors']
          chapter 7 discharge, or that it did not intend
          to communicate to the [debtors] its refusal to
          release its lien in the automobile so that it
          could be junked.
Id.

          In addition, the current version of the Internal Revenue

Manual appears to adopt the same generally accepted definition for

violations of automatic stays and discharge orders.         The Manual

defines "willful" as "an act that was committed intentionally or

knowingly" and states that "[a] willful violation occurs when the

Service has received notice of a voluntary bankruptcy filing or of

the court's granting of a discharge, and the Service does not

respond   timely   to   stop   its    collection   activities."   I.R.M.

1.4.51.2.7.1 (Aug. 11, 2015).        Although the Manual does not have

the force and effect of law, we may rely on it to the extent we

find it persuasive.     See Heinz v. Cent. Laborers' Pension Fund,

303 F.3d 802, 812 n.17 (7th Cir. 2002) (citing United States v.

Mead Corp., 533 U.S. 218 (2001)).

                                     V.

          We turn then to the IRS's alternative argument: that

even if there was a generally accepted definition of "willful

violation," such a definition is too broad to be applied against

the United States because § 7433(e) is a waiver of sovereign

immunity and such waivers must be narrowly construed.

                                - 23 -
            It is true that courts "construe any ambiguities in the

scope of a waiver in favor of the sovereign."             FAA v. Cooper, 566
U.S. 284, 291 (2012).       At the same time, "the sovereign immunity

canon 'is a tool for interpreting the law' and . . . it does not

'displac[e]     the      other      traditional    tools       of   statutory

construction.'"    Id. (quoting Richlin Sec. Serv. Co. v. Chertoff,

553 U.S. 571, 589 (2008)).          We thus must "be careful not to be

more stinting in the interpretation of the provision than its

language requires," for "just as the courts should not construe a

waiver of sovereign immunity more broadly than Congress intended,

'[n]either, however, should we assume the authority to narrow the

waiver that Congress intended.'"          Rakes v. United States, 442 F.3d
7, 19 n. 6 (1st Cir. 2006) (quoting United States v. Kubrick, 444
U.S. 111, 118 (1979)).

            As discussed above, traditional interpretive tools lead

us to conclude that the generally accepted definition of "willful

violation" should apply to § 7433(e). By 1998, "willful violation"

had   an   established    meaning    in   the   context   of   violations   of

automatic stays, and this established meaning had been applied to

violations of discharge orders. And, by 1998, the Tax Code already

allowed the IRS to raise its good faith belief, not as a defense

to liability, but as a means of limiting the taxpayer's recovery

to the actual damages incurred. Moreover, several of the decisions

adopting the generally accepted definition of "willful violation"

                                     - 24 -
before       1998    applied   that    definition      against    the   government,

despite the government's invocation of sovereign immunity.                   See In

re Hardy, 97 F.3d at 1390; In re Jove Eng'g, Inc., 92 F.3d at 1555-

56; In re Price, 42 F.3d at 1071; In re Pinkstaff, 974 F.2d at

115.

               When considering the scope of a waiver of sovereign

immunity,       a     "narrower       temporal    approach       --     looking   at

congressional understanding of the enumerated sections at the time

of the [enactment] -- is preferable," in part because "the approach

adheres to the general principle that Congress is presumed to know

the content of background law."             United States v. Torres (In re

Rivera Torres), 432 F.3d 20, 25 (1st Cir. 2005).                        By directly

linking the phrase "willfully violates" in § 7433(e) to sections

362    and    524,    Congress    sought   to    use    the   generally    accepted

definition of the phrase "willful violation" in this context as

the limit to its waiver of sovereign immunity.                   And, when we look

past 1998, our subsequent caselaw and the administrative materials

from the IRS itself both confirm that the generally accepted

standard should control.              For these reasons, we do not believe

sovereign immunity requires us to adopt a more narrow definition

of "willfully violates."

               The IRS claims that if we apply the generally accepted

definition of "willful violation" to § 7433(e), we are effectively

forcing it to "seek a pre-enforcement determination from the

                                        - 25 -
bankruptcy court about whether a tax debt has been discharged prior

to initiating any post-discharge collection efforts," which would

be both impractical and inconsistent with other provisions of the

Bankruptcy Code.

             We agree that "the IRS need not appear and object in the

bankruptcy     court      to    be   excepted       from     [a]   discharge   under

§ 523(a)(1)(C)."       Console v. Comm'r, 291 Fed. App'x 234, 237 (11th

Cir. 2008). Nothing in our decision today forces the IRS to obtain

a pre-enforcement determination before seeking to collect on tax

obligations like Murphy's.            The IRS remains free to "wait until

the bankruptcy discharge is invoked as a defense to its collection

efforts, and then prove a factual basis for the tax fraud exception

in the collection proceedings."              Id.

             But,    to   the    extent      we    find    policy    considerations

relevant, we believe compelling policy justifications, embodied in

§ 7433(e), weigh against allowing the IRS to attempt to collect

purportedly         discharged       debts         without     facing     potential

consequences.        Discharge orders "ensure that debtors receive a

'fresh start' and are not unfairly coerced into repaying discharged

prepetition debts." In re Pratt, 462 F.3d at 19. Congress enacted

§ 7433(e) to protect taxpayers who invoked the bankruptcy process,

providing them with a means of recovering damages if an employee

of the IRS willfully violates either the automatic stay or the

                                       - 26 -
discharge order, the two foundational orders of the bankruptcy

process.

            If the IRS found the February 14, 2006 discharge order

ambiguous, there was a variety of processes available to it to

determine whether Murphy's tax obligations had been discharged.

First, although not obligated to, the IRS could have forestalled

any   possible     question      about   dischargeability       by   filing     an

objection in the bankruptcy court after it received notice of

Murphy's petition but before Murphy received his discharge.                   See

Console, 291 Fed. App'x at 237; see also Korte v. United States

(In re Korte), 262 B.R. 464, 471 (B.A.P. 8th Cir. 2001).                 Second,

the IRS could have filed an adversary proceeding before it began

its collection efforts to obtain a determination of whether the

tax obligations were covered by the discharge order.                 See Hassell

v. Comm'r, 92 T.C.M. 273, 2006 WL 2602032, at *3 (2006);

United States v. Acker (In re Acker), No. 09-41961, 2010 WL
3547221, at *1 (Bankr. E.D. Tex. Sept. 7, 2010).

            Alternatively, the IRS could, as it did, attempt to

collect    from   Murphy   and    thereby   force    him   to   return   to    the

bankruptcy court to obtain a determination that the debts had been

discharged. And, of course, if AUSA Emery had adequately supported

the   opposition    for    summary   judgment   on    dischargeability        with

admissible evidence back in 2010, the bankruptcy court may well

                                     - 27 -
have ruled in the IRS's favor and brought this case to an end years

ago, with the IRS facing no penalty for its collection efforts.

            Because   of   the    parties'   settlement   agreement,   the

factual issues surrounding Murphy's alleged tax evasion and AUSA

Emery's cognitive disability are no longer relevant to this case.

We agree with the dissent that no judge has found that Murphy did

not evade taxes, and we take seriously the allegations against

Murphy that the IRS continues to make in its filings.7

            If we were to adopt the IRS's definition, we would render

§ 7433(e) a near nullity.        As the bankruptcy court ably described

it below:

            [t]he IRS's position is that, as far as tax
            collection and § 523(a)(1)(C) goes, it retains
            the authority to make up its mind whether tax
            obligations are discharged, that it may act
            unilaterally on the basis of its conclusions,
            and that it encounters no risk for doing so,
            as long as it has a "good faith" or "reasonable
            belief" for its conclusion.

     7  Based on the odd procedural history of this case, no
factfinder has yet resolved whether AUSA Emery's disability caused
him to file the deficient opposition to summary judgment.      The
district court's 2016 order remanded the case back to the
bankruptcy court in part so the bankruptcy court could resolve
these issues and thereby determine whether application of
offensive collateral estoppel against the IRS was proper. Murphy,
564 B.R. at 111-12. Ultimately, the parties left the issue open
in their settlement, in part because of "the desire to avoid not
only their respective risk of loss on the determination of whether
offensive collateral estoppel should apply, but also the potential
for the determination to entail substantial litigating expenses
(including possible expert medical testimony) and substantial
delay."

                                   - 28 -
In re Murphy, 2013 WL 6799251, at *6.

Under this view, it is hard to imagine a case where a taxpayer

could ever collect against the government for a violation of the

automatic stay or discharge order. Although the dissent forcefully

argues that the sovereign immunity canon compels this narrow

definition of "willfully violates," we ultimately find that the

dissent's position "presents an unduly restrictiv[e] reading of

the congressional waiver of sovereign immunity, rather than a

realistic assessment of legislative intent."    Franconia Assocs. v.

United States, 536 U.S. 129, 145 (2002) (alteration in original)

(internal quotation marks and citations omitted).

                                  VI.

             The IRS had several opportunities to obtain a judicial

determination that Murphy's tax obligations were excepted from

discharge.    The bankruptcy court determined, based on the evidence

presented to it, that Murphy's tax obligations were not excepted

from discharge.    In such cases where a taxpayer's debt is found to

be discharged, Congress has allowed the taxpayer to pursue an

action against the United States under § 7433(e) if an employee of

the IRS knew of the discharge order and took an intentional action

that violated the order.

             For the foregoing reasons, we affirm.

                     -Dissenting Opinion Follows-

                                - 29 -
             LYNCH, Circuit Judge, dissenting.         With the greatest

respect for my esteemed colleagues, I think the majority gets this

one wrong.    To the best of my knowledge, this is the first opinion

by a circuit court of appeals construing the phrase "willfully

violates"     in   26 U.S.C.    § 7433(e),   enacted     in    1998,    and,

importantly, the first to deprive the United States, through the

IRS, of its sovereign immunity under that statute even where the

United States acted on a reasonable and good faith belief that a

discharge injunction did not apply to its collection efforts

against a tax debtor.

             To be clear, there is no explicit waiver by Congress of

sovereign    immunity   under   these   circumstances.        The   majority

attempts to infer such a waiver.        To the contrary, the Bankruptcy

Code itself provides that a discharge injunction does not apply to

a tax debt "with respect to which the debtor made a fraudulent

return or willfully attempted in any manner to evade or defeat

such tax."     11 U.S.C. § 523(a)(1)(C).      And the IRS here says it

believed in good faith that the tax debts it attempted to collect

fell into this exception.

             Further, the plain meaning of the phrase "willfully

violates," Supreme Court precedent interpreting the term "willful"

and the phrase "willful violation," the structure of the statutory

scheme, and the sovereign immunity canon all point toward § 7433(e)

not stripping the IRS of a reasonable good faith defense.           Because

                                  - 30 -
the majority opinion deprives the United States of sovereign

immunity and does so for reasons which I conclude are inconsistent

with Congressional intent, Supreme Court precedent, and with rules

of construction, I lay out the basis for my dissent.

A.    Sovereign Immunity

             Sovereign immunity is waived only if Congress clearly

intended as much.     See F.A.A. v. Cooper, 566 U.S. 284, 290 (2012).

"A waiver of sovereign immunity 'cannot be implied but must be

unequivocally expressed.'"         Irwin v. Dep't of Veterans Affairs,

498 U.S. 89, 95 (1990) (quoting United States v. Mitchell, 445
U.S. 535, 538 (1980)).

             "[A]ny ambiguities in the scope of a waiver" are to be

construed "in favor of the sovereign."          Cooper, 566 U.S. at 291.

"Ambiguity exists if there is a plausible interpretation of the

statute     that   would   not   authorize   money    damages   against    the

Government."       Id. at 290-91.      Consequently, we must determine

whether § 7433(e) can be plausibly interpreted not to authorize

money damages against the United States where the IRS acted

reasonably and in good faith to collect a tax debt.             The statute

can   and    should   be   so    interpreted.    In    my   view,   such    an

interpretation is far more than plausible.

             There is no expression by Congress here of a waiver of

sovereign immunity where the IRS acts reasonably and in good faith

to collect tax debts it reasonably believes do not fall within the

                                    - 31 -
scope of a discharge injunction.       When Congress intends to waive

sovereign immunity, it knows how to do so explicitly.          See, e.g.,

11 U.S.C. § 106(a) ("Notwithstanding an assertion of sovereign

immunity, sovereign immunity is abrogated as to a governmental

unit to the extent set forth in this section with respect to the

following   [enumerated   provisions   of   the   Bankruptcy    Code].");

26 U.S.C. 7433(a) (creating a cause of action for damages against

the United States "[i]f, 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").        Congress did not

do so here and it easily could have.8

     8    Franconia Assocs. v. United States, 536 U.S. 129 (2002),
is cited by the majority, but it has nothing to do with the issues
presented here. The limitation principle referred to there was
not about sovereign immunity at all, but about whether a special
accrual rule from a statute of limitations should be carved out
for the government when there is a repudiation of a Farmer's Home
Administration loan contract. See id. at 145. It is true that
Franconia cites to language about sovereign immunity in two other
cases, but once again those cases assist the dissent.         Irwin
involved an explicit statutory waiver of immunity and the question
presented was whether the doctrine of equitable tolling fell within
that exception. 498 U.S. at 95. The same is true of the question
presented in Bowen v. City of New York, 476 U.S. 467 (1986), where
Congress had explicitly waived sovereign immunity as to certain
social security suits and the issue was whether the waiver included
recognition of the equitable tolling doctrine. See id. at 479-
80.

                               - 32 -
B.      Text of 26 U.S.C. § 7433(e)

               As a matter of statutory construction, we must first

look the text of § 7433(e).                  See SAS Inst., Inc. v. Iancu, 138
S. Ct. 1348, 1354 (2018); Mississippi ex rel. Hood v. AU Optronics

Corp., 571 U.S. 161, 168 (2014).                  Section 7433(e) states that,

"[i]f, in connection with any collection of Federal tax with

respect to a taxpayer, any officer or employee of the [IRS]

willfully violates any provision of section 362 . . . or 524 . . .

of title 11 . . . [,] such taxpayer may petition the bankruptcy

court to recover damages against the United States."                          (emphasis

added).

               This case turns on how we interpret the phrase "willfully

violates."        "Willfully" modifies "violates," and the ordinary

meaning of "willful," which controls where the term is not defined

in the statute, see Octane Fitness, LLC v. ICON Health & Fitness,

Inc.,    134    S.     Ct.   1749,    1756    (2014),   is   "deliberate"       or   "on

purpose."         E.g.,      Wilful,    Oxford     English    Dictionary       Online,

http://www.oed.com/view/Entry/229028 (last visited May 25, 2018)

("Done on purpose or wittingly; purposed, deliberate, intentional;

not accidental or casual. Chiefly, now always, in bad sense, of an

action either evil in itself or blameworthy in the particular case"

(emphasis added)); Willful, Merriam-Webster's Dictionary Online,

https://www.merriam-webster.com/dictionary/willful (last visited

May   25,      2018)    ("done       deliberately").         So   the   IRS    has    to

                                         - 33 -
deliberately violate a discharge injunction to be liable under

§ 7433(e).

             Applying   these   definitions      of    "willful"      here,    the

statute should (and certainly can plausibly) be read to provide

the United States with a good faith defense.            "Willfully" requires

that the violation be done "deliberately" or "knowingly."                In this

case, that would mean an IRS employee must have violated the

discharge injunction deliberately, with knowledge that he was

violating the injunction.9

             Under   other   provisions     of   the   Bankruptcy      Code,    no

creditor, whether the IRS or another, necessarily violates a

discharge injunction merely by trying to collect a debt while aware

of the injunction.       See, e.g., United States v. Ellsworth (In re

Ellsworth), 158 B.R. 856, 858 (Bankr. M.D. Fl. 1993).                 Rather, a

discharge injunction is violated only if the particular debt that

the creditor is trying to collect was actually discharged as a

result of the injunction. But IRS debts receive special treatment.

Section 523(a)       lists   several   types     of    debts   that    are     not

dischargeable, and that list includes tax debts "with respect to

which the debtor . . . willfully attempted . . . to evade or defeat

such tax."    When the IRS, knowing of a discharge injunction, makes

tax debt collection efforts, and it has reasonably and in good

     9       There is no claim the IRS acted recklessly.

                                   - 34 -
faith, even if erroneously, determined that the tax debt was not

dischargeable and thus was not covered by the discharge injunction,

the IRS's "violation" was not done deliberately merely because its

assessment of the effect of the injunction was incorrect.

          No judge in this case has even held that the debtor did

not in fact make "a fraudulent return or willfully attempt in any

manner to evade or defeat such tax."   Id. § 523(a)(1)(C).   At most,

the initial bankruptcy judge held that the IRS attorney (who the

IRS maintains had been made incompetent by the onset of dementia)

did not "present [the] evidentiary quality material" required to

prove tax fraud. The IRS also maintains that the disabled attorney

also did not give notice to the IRS of his actions in the case,

leaving the IRS unaware of his incapacity and his failure to

provide adequate evidence. The extent and timing of the attorney's

disability is relevant to whether an IRS employee "willfully

violate[d]" the discharge injunction under the plain meaning of

that phrase. Yet the majority's holding would render these factors

irrelevant.

C.   Pre-Section-7433(e) Case Law

          1.   Supreme Court Precedent

          The majority reasons that the key to this case is found

in the premise that Congress is presumed to know how the law has

been interpreted by the courts, and then to legislate against that

                              - 35 -
backdrop.    See Hood, 571 U.S. at 169; Bragdon v. Abbott, 524 U.S.
624, 644-45 (1998).

             The    majority,    though,     in    my   view,   misapplies    the

premise.     I disagree that we should interpret § 7433(e) based on

how   some   circuit    courts    had   interpreted      the    phrase   "willful

violation" in the context of a different and older statute, 11

U.S.C. § 362(h).        We cannot ignore the decades of Supreme Court

case law interpreting the term "willful" and the phrase "willful

violation."        Congress, after all, did not simply say "violates";

§ 7433(e) modifies and restricts the word "violates" with the word

"willful."

             If we are to "presume that Congress is knowledgeable

about   existing      law   pertinent   to   the    legislation    it    enacts,"

Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 185 (1988), then we

should presume here that Congress knew about clearly established

Supreme Court precedent.         I would have thought that Supreme Court

law would be far more relevant than the general and not uniform

pronouncement of some circuits.

             Congress would have been particularly aware of how the

Supreme Court interpreted the term "willful" in Kawaauhau v.

Geiger, 523 U.S. 57 (1998), which was decided just months before

§ 7433(e) was passed.         Kawaauhau was a natural place to look: it

pertained to 11 U.S.C. § 523, a part of the Bankruptcy Code that

lists the types of debts that cannot be discharged. See Kawaauhau,

                                    - 36 -
523 U.S. at 59.    Section 523 is a statute of intrinsic importance

when determining whether a discharge injunction was willfully

violated.    In Kawaauhau, the Court determined that "willful . . .

injury" included only acts that were specifically intended to cause

injury, not all intentional acts that resulted in injury. 523
U.S. at 61.    The Court explained its holding as follows:

             The word "willful" . . . modifies the word
             "injury," indicating that nondischargeability
             takes a deliberate or intentional injury, not
             merely a deliberate or intentional act that
             leads to injury. Had Congress meant to exempt
             debts    resulting    from    unintentionally
             inflicted injuries, it might have described
             instead "willful acts that cause injury." Or,
             Congress might have selected an additional
             word   or   words,    i.e.,   "reckless"   or
             "negligent," to modify "injury."

Id.   That logic maps directly onto the language of § 7433(e).

"Willfully"     modifies   "violates,"   so   liability   requires     a

deliberate or intentional "violation."        Had Congress intended

otherwise, it would have said so clearly.          We should assume

Congress knew about this latest Supreme Court interpretation of

similar language in the bankruptcy context when it was drafting

§ 7433(e).

             Moreover, the Supreme Court, consistent with Kawaauhau,

had long held that "willful violation" requires that the violator

"knew or showed reckless disregard for the matter of whether its

conduct was prohibited."    Trans World Airlines, Inc. v. Thurston,

469 U.S. 111, 128-29 (1985).    The Supreme Court, before § 7433(e)

                                - 37 -
was enacted, also had repeatedly held that the term "willful"

requires more than negligence.    See Bryan v. United States, 524
U.S. 184, 196 (1998) (holding that a criminal statute's use of

"willful" required "knowledge that the conduct is unlawful");

McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988) ("The

word 'willful' is widely used in the law, and . . . is generally

understood to refer to conduct that is not merely negligent.");

United States v. Ill. Cent. R. Co., 303 U.S. 239, 243 (1938)

(holding that "[w]illfully . . . means purposely or obstinately

and is designed to describe the attitude of a carrier, who, having

a free will or choice, either intentionally disregards the statute

or is plainly indifferent to its requirements." (quoting St. Louis

& S.F.R. Co. v. United States, 169 F. 69, 71 (8th Cir. 1909)));

United States v. Murdock, 290 U.S. 389, 395 (1933) ("The word

["willfully"] is . . . employed to characterize a thing done

without ground for believing it is lawful, or conduct marked by

careless disregard whether or not one has the right so to act."

(citations   omitted)).   These   cases10   mean   that   the   phrase

"willfully violates" in § 7433(e) certainly requires more than

mere knowledge of a discharge injunction in order to have a

     10   The Supreme Court in Safeco Ins. Co. of Am. v. Burr, 551
U.S. 47 (2007), stated that "where willfulness is a statutory
condition of civil liability," that term typically covers
"knowing" and "reckless" violations. Id. at 57.

                             - 38 -
violation of that injunction, especially when the IRS has a

reasonable good faith belief that the injunction does not apply.

           2.      Circuit Precedent Was Neither Clear nor Unanimous

           Even if we could look at circuit and bankruptcy court

interpretations of other statutes, 11 U.S.C. §§ 362(h) and 524, to

interpret the phrase "willfully violates," the definition of that

phrase must have been clearly established and "settled" at the

time § 7433(e) was enacted in order for the majority's argument to

succeed.   Armstrong v. Exceptional Child Ctr., Inc., 135 S. Ct.
1378, 1386 (2015) (declining to apply the prior-construction canon

because,   inter    alia,    the   courts'   interpretation   of   the   pre-

existing statutory provision was not "settled" (quoting Bragdon,
524 U.S. at 645)); see also United States v. Torres (In re Rivera

Torres), 432 F.3d 20, 26 (1st Cir. 2005).

           The     Supreme    Court    has   only   applied    a   judicial

interpretation of a pre-existing statute to a new statute where

that interpretation was unanimous or very close to it.                   See

Bragdon, 524 U.S. at 644-45 (holding that, because "[e]very court"

that had interpreted the preexisting statute was in agreement,

"the new statute should be construed in light of this unwavering

line of administrative and judicial interpretation" (emphasis

added)); Lorillard v. Pons, 434 U.S. 575, 580 (1978) (applying the

prior-construction canon where "every court" to interpret the pre-

existing statute had been in agreement).

                                    - 39 -
          I do not see the pre-§ 7433(e) consensus among those

courts that the majority does.   Before the enactment of § 7433(e),

seven circuits had stated that the phrase "willful violation" in

§ 362(h), which concerns stays of collection activity once a debtor

files for bankruptcy, applied whenever a creditor knew of an

automatic stay and violated it.11   However, three circuits had held

that more was required in order for the violation of the stay to

be "willful."   Seven out of ten is a circuit split, not a clear

consensus.12    And a stay is not a discharge injunction, and

"creditor" encompasses far more than the IRS.

     11   The majority also references Hardy v. IRS, (In re Hardy),
97 F.3d 1384 (11th Cir. 1996), which interpreted the phrase
"willful violation" in the § 524 context. That case is of little
help because it was the only circuit case addressing that
definition in the § 524 context when § 7433(e) was passed, meaning
the § 524 case law was not "clearly established." In re Rivera
Torres, 432 F.3d at 26.
     12   In order to support its argument that Congress would
have understood "willfully violates" to cover situations where the
IRS acted reasonably and in good faith, the majority looks to
circuit case law post-dating the enactment of § 7433(e). Cases
from the 2000s do not help us determine how Congress would have
understood a phrase in 1998. Even so, there is no consensus on
the definition of "willful" in the § 524 discharge injunction
context. The Ninth Circuit has held that a good faith belief that
one is not violating a discharge injunction is sufficient to show
that there was no "willful violation" of the discharge injunction.
See Lorenzen v. Taggert (In re Taggert), 888 F.3d 438, 444 (9th
Cir. 2018).   Indeed, the Ninth Circuit does not even impose a
reasonableness requirement.    Id.   ("the creditor's good faith
belief that the discharge injunction does not apply to the
creditor's claim precludes a finding of contempt, even if the
creditor's belief is unreasonable" (emphasis added) (citing
Corning v. Corning (In re Zilog, Inc.), 450 F.3d 996, 1009 n.14
(9th Cir. 2006))).

                              - 40 -
            As I read the law of the First Circuit, it specifically

allowed for reasonable good faith as a defense to a claimed willful

violation of a stay.        See Nelson v. Taglienti (In re Nelson), 994
F.2d 42, 45 (1st Cir. 1993); see also Vahlsing v. Commercial Union

Ins. Co., 928 F.2d 486, 490 (1st Cir. 1991).               In Vahlsing, this

court noted that "[v]iolation of [a] stay . . . is not a strict

liability tort." 928 F.2d at 490.     In In re Nelson, this court

went further, holding that a bankruptcy stay was not willfully

violated because, inter alia, "it was reasonable for [the creditor]

to believe that the property was not part of the bankruptcy

estate." 994 F.2d at 45.      In re Nelson was still controlling law

when § 7433(e) was enacted in 1998.

            Other circuits had also held that a colorable legal

argument of no violation was sufficient to show that a violation

of an automatic stay was not willful.             The Fifth Circuit had held

that a creditor did not "willfully violate[] the automatic stay"

because    her   legal    position   that   the    stay   did   not   apply   was

"arguable."      Sherk v. Tex. Bankers Life & Loan Ins. Co. (In re

Sherk), 918 F.2d 1170, 1178 (5th Cir. 1990) abrogated on other

grounds by Taylor v. Freeland & Kronz, 503 U.S. 638, 643 (1992).

          The same is true of the majority's reference to the
Internal Revenue Manual. A citation to the current Manual does
not tell us how Congress would have interpreted "willfully
violates" in 1998. As the majority concedes, the Manual does not
even have the force of law.

                                     - 41 -
The Sixth Circuit took a similar position in Andrews University v.

Merchant (In re Merchant), 958 F.2d 738 (6th Cir. 1992), finding

that a university's violation of an automatic stay "was not

willful" without holding that the university did not know of the

stay.        Id. at 740, 742.

                The majority posits that Congress would have ignored

these three circuit court opinions when drafting § 7433(e), but

provides no credible reason why.13         The majority dismisses these

cases as "limited resolutions of idiosyncratic fact patterns," but

the holdings on these fact patterns establish the very point that

proves the majority wrong.        When § 7433(e) was passed in 1998,

three circuits had held that a colorable legal position was

        13The majority attempts to deny the existence of this
circuit split by pointing to a handful of lower and Article I court
cases that are not in accordance with the precedent of their
respective circuits.    These cannot minimize the circuit split.
The First, Fifth, and Sixth Circuits had held that mere knowledge
of a stay was insufficient to show a "willful violation."
          The majority similarly argues that Congress would have
ignored these cases when drafting § 7433(e) because they lack "a
broader analysis of the meaning of 'willful violation.'" First,
many of the circuit cases adopting the majority's favored
definition of "willful violation" also provide little analysis.
See, e.g., Price v. United States (In re Price), 42 F.3d 1068,
1071 (7th Cir. 1994); Goichman v. Bloom (In re Bloom), 875 F.2d
224, 227 (9th Cir. 1989). Second, that the analysis may have been
limited in these three cases is irrelevant. Three circuits had
held that a colorable legal argument was sufficient to show that
a violation was not "willful" under § 362(h). That is enough to
find that the meaning of "willful violation" was not clearly
established, regardless of how much analysis the three circuits
provided.

                                  - 42 -
sufficient to show that a violation of a stay was not willful.

These decisions never said that their interpretation of "willful

violation" in § 362(h) was affected by the unusual nature of the

facts presented.      Bankruptcy cases -- including this one -- often

involve unusual facts; the peculiarity of the facts in a couple of

the cases involved in the pre-1998 circuit split does not mean

that Congress would have interpreted those cases differently or

seen a consensus where there was none.           The majority argues that

In re Nelson was limited to its facts but, even if that were true,

its holding that a reasonable legal argument was sufficient to

render    a    violation   not   willful    is   irreconcilable   with   the

majority's holding in this case.

D.   Congress's Tax Collection Scheme Is Inconsistent with the
     Majority View

              The statutory context for the IRS tax collection scheme,

which we are required to consider, see SAS Inst., 138 S. Ct. at

1355, is also inconsistent with the majority view.          I am concerned

that that majority holding will cause damage to the tax collection

scheme.   The practical effect of the decision is to impose damages

on the IRS when it initiates collection efforts in the face of a

discharge injunction that the IRS reasonably and in good faith

determines does not apply.        The opinion effectively requires the

IRS to first go to court and prove its case that the taxes are

                                   - 43 -
owed before instituting any collection efforts.                  But Congress has

decided to the contrary.

                Congress specifically chose not to require the IRS to

first        obtain   a    judicial   determination   that       an   exception   to

discharge applies before engaging in tax debt collection efforts.

Section 523(a) holds that certain types of debts, including tax

debts "with respect to which the debtor made a fraudulent return

or willfully attempted in any manner to evade or defeat such tax,"14

are excepted from a discharge injunction.             Id. § 523(a)(1)(C).         By

contrast, § 523(c)(1) specifies that three particular types of

debts are automatically deemed included in a discharge injunction

unless        or   until      the   creditor   initiates     a    post-injunction

adversarial proceeding that yields a judicial determination that

the debt is excepted from discharge.             Significantly, tax debts are

not listed in § 523(c)(1).            This means that Congress chose not to

require that the IRS seek a pre-collection determination from the

bankruptcy court that tax debts are excepted from a discharge

injunction.           Given    that   Congress   created   this       exception   to

        14The issue of dischargeability of debts resulting from a
debtor's dishonesty is important, as evidenced by the grant of
certiorari in Appling v. Lamar, Archer & Cofrin, LLP (In re
Appling), 848 F.3d 953 (11th Cir. 2017), cert. granted, 138 S. Ct.
743 (Jan. 12, 2018) (No. 16-1215). See id. at 955 (holding that
a debt was not excepted from discharge under § 523(a)(2) because
the debtor's misrepresentation about a future cash flow amounted
to a misrepresentation about his financial condition and was not
made in writing).

                                        - 44 -
discharge and did not require the IRS to seek a pre-collection

determination that tax debts are not dischargeable, there is no

reason to say that the IRS should incur the risk of having damages

found against it even if it acted on a reasonable and good faith

belief that the tax debts were excepted from discharge.15

            If Congress had intended to require the IRS to seek a

pre-collection determination from the bankruptcy court or had

intended for the IRS to incur a risk of damages under these

circumstances even when it acts reasonably, it would have said so

directly.   Epic Sys. Corp. v. Lewis, Nos. 16-285, 16-300, 16-307,

slip op. at 15 (U.S. May 21, 2018) ("Congress 'does not alter the

fundamental details of a regulatory scheme in vague terms or

ancillary provisions -- it does not, one might say, hide elephants

in mouseholes.'"    (quoting Whitman v. Am. Trucking Ass'ns, Inc.,

531 U.S. 457, 468 (2001))).     Yet the majority has, in effect,

imposed such a requirement.   In doing so, the majority reaches a

result that Congress contemplated and explicitly rejected.

     15   The majority argues that Congress clearly used the
phrase "willfully violates" in order to "directly link" § 7433(e)
to the "willful violation" standard used in § 362(h).      But the
phrase "willfully violates" relates just as directly to Supreme
Court precedent interpreting similar phrases.     In any case, a
"direct link" to the standard used for § 362(h) is only helpful to
the majority to the extent there was a consensus around that
standard when § 7433(e) was passed, and there was none.

                               - 45 -
              I also disagree with the majority's argument that the

existence of 26 U.S.C. § 7430(c)(4)(B) in 1998 shows that Congress

intended for § 7433(e) to waive sovereign immunity even where the

IRS has a reasonable and good faith belief that the debt was not

discharged. Section 7430 is concerned with an altogether different

topic.   It allows a "prevailing party" in litigation against the

IRS to recover "reasonable litigation costs incurred in connection

with such court proceeding," under certain circumstances.           Id. at

§ 7430(a)(2).     And even under § 7430, a victorious taxpayer is not

treated as a "prevailing party," and so is unable to recover

litigation costs against the IRS, if the IRS's litigation position

was "substantially justified."      Id. at § 7430(c)(4)(B).

              Contrary to the majority's assertion, the IRS cannot

mitigate the damages it is forced to pay to the taxpayer under the

majority's interpretation of § 7433(e) by showing a substantial

justification for its position under § 7430(c)(4)(B).              Section

7430 only covers "litigation and administrative costs," so having

a substantially justified position does not allow the IRS to

mitigate the § 7433(e) damages the majority would force it to pay.

Parties are routinely required to cover their own costs; § 7430's

cost-shifting provision has no bearing on § 7433(e) damages.

              It is not true, as the majority posits, that adopting

the   IRS's    definition   of   "willfully   violates"   "would    render

§ 7433(e) a near nullity."        Adopting the IRS's definition would

                                  - 46 -
only free it to collect tax debts that it reasonably believes are

not covered by a discharge injunction or automatic stay.            If the

IRS were to collect other types of tax debts not exempted from

discharge by § 523, that would present a different issue under

§ 7433(e), which is not before us.

             The majority appears skeptical that courts would ever

find that the IRS has violated the reasonableness requirement.

Several   bodies   of   law   instruct    courts   to   inquire   into   the

reasonableness of an actor's behavior, including torts, see, e.g.,

Restatement (Second) of Torts § 282 (1965), and administrative

law, see, e.g., Chevron, U.S.A., Inc. v. Nat. Res. Def. Council,

Inc., 467 U.S. 837, 844 (1984).            The use of a reasonableness

standard in those areas does not render the relevant statutes near

nullities.

             In my view, the intent of Congress is clearly not to

waive sovereign immunity in these circumstances. But even if there

were ambiguity, that ambiguity itself would require that we find

no waiver of sovereign immunity.         I respectfully dissent.

                                 - 47 -