Court Opinion

ID: 3050924
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:33:16.204901+00
Date Added: 2024-06-11T12:44:08.659202
License: Public Domain

United States Court of Appeals,

                               Fifth Circuit.

                               No. 94-40713.

 Rhonda K. WILKERSON, d/b/a Forstar Trailers, Plaintiff-Appellee,
Cross-Appellant,

                                     v.

 UNITED STATES of America, Defendant-Appellant, Cross-Appellee.

                               Oct. 23, 1995.

Appeals from the United States District Court for the Eastern
District of Texas.

Before JOLLY, DAVIS and EMILIO M. GARZA, Circuit Judges.

      EMILIO M. GARZA, Circuit Judge:

      The government appeals the district court's award of damages

for   wrongful    levy   and   wrongful     disclosure   flowing      from    tax

collection activities aimed at the assets of Plaintiff Rhonda K.

Wilkerson.    The government also appeals the district court's award

of attorney's fees and costs.        Wilkerson cross-appeals asserting

that the district court improperly denied her Fifth Amendment

claims.   We affirm in part, reverse in part, vacate in part, and

remand for further proceedings.
                                     I

      This suit grows out of the Internal Revenue Service's efforts

to collect Robert D. Forsyth's delinquent income taxes.                Based on

information   received    from    various    sources,    the   IRS    began   to

investigate      Forsyth's     relationship     with     Rhonda      Wilkerson.

Wilkerson had just started Forstar Trailers ("Forstar"), a trailer

manufacturing business of the same type that Forsyth had been

                                     1
involved in prior to his relationship with Wilkerson.           The IRS

suspected that Wilkerson might be sheltering Forsyth's assets and

income in her name.     After further investigation, the IRS found

what it believed to be credible evidence that Wilkerson and Forsyth

were common-law married.      Besides sharing a residence, Wilkerson

and Forsyth had represented to family members that they were

married, and Wilkerson had endorsed several checks made out to

"Rhonda Forsyth" by signing that name. Neighbors and acquaintances

confirmed that the two were married, and Wilkerson and Forsyth were

expecting a child.     Based on this evidence, the IRS issued one

Notice of Levy on Wilkerson's bank account, and thirty-seven

Notices of Levy to persons believed to be customers and suppliers

of   Wilkerson's   trailer   business.1   Although   both   Forsyth   and

Wilkerson continued to deny that they were married, IRS supervisors

felt that they had sufficient evidence to pursue a portion of

Wilkerson's assets.

      After subsequent communication with the IRS, Wilkerson's bank

complied with the Notice of Levy and forwarded $2,469.39 to the IRS

which the IRS applied to Forsyth's tax debt.     The IRS collected no
other funds from Wilkerson.      As a result of the Notices, however,

      1
      The Notices of Levy identified Robert D. Forsyth as the
delinquent taxpayer and asked for payment of $22,033.79. The
Notices of Levy also stated:

           By virtue of the taxes assessed against Robert D.
           Forsyth, SSN XXX-XX-2387, this levy covers and attaches
           to one-half of any funds due and owing to Rhonda
           McClain Wilkerson, dba Forstar Trailers, SSN XXX-XX-
           5712, EIN XX-XXXXXXX, such funds being the community
           property of Robert Forsyth and Rhonda McClain
           Wilkerson.

                                    2
Wilkerson's business began to falter.             Wilkerson's customers and

suppliers were reluctant to continue dealing with Forstar.                After

Forstar went out of business, Wilkerson filed administrative claims

with the IRS.    The IRS denied Wilkerson's claims by letter, and

Wilkerson filed suit in the district court.

      Wilkerson brought claims against the IRS for wrongful levy

under 26 U.S.C. § 7426 and § 7433 (for reckless or intentionally

wrongful collection activities);          wrongful disclosure of her tax

return information under 26 U.S.C. § 7431;                 violation of the

Privacy Act, 5 U.S.C. § 552(a);           violations of the Federal Tort

Claims Act, 28 U.S.C. §§ 1346(b), 2671-2680;               violations of the

Administrative Procedure Act, 5 U.S.C. §§ 701-706;               and violation

of her Fifth Amendment rights.       The district court concluded that

Wilkerson and Forsyth were not common-law married and that the IRS

was negligent in assuming so.            Accordingly, the district court

awarded $2,469.39 in damages for the wrongful levies. The district

court also concluded, based on the wrongfulness of the levies, that

the IRS had wrongfully disclosed Wilkerson's tax return information

and   awarded   her   $209,547.19    for    the    value   of    Forstar,   and
$20,000.00 for emotional distress.            The district court denied

recovery on all other grounds, but awarded Wilkerson attorney's

fees and costs under 26 U.S.C. § 7430.            Neither party appeals the

district court's finding that the levies were wrongful nor the

award of $2,469.39 in damages for the levies.                   The government

appeals   the   district   court's   award     of    damages     for   wrongful

disclosure, and the district court's award of attorney's fees and

                                     3
costs.      Wilkerson cross-appeals on her Fifth Amendment claims.

                                      II

          We review the district court's findings of fact under the

clearly erroneous standard. Barrett v. United States, 51 F.3d 475,

478 (5th Cir.1995) (citing Robicheaux v. Radcliff Material, Inc.,

697 F.2d 662, 666 (5th Cir.1983)).               The legal conclusions based

upon those facts, however, we review de novo.                Id.    Wilkerson's

claim of wrongful disclosure turns on a proper interpretation of

the Internal Revenue Code and as such is a question of law

reviewable de novo.      Estate of Moore v. Commissioner, 53 F.3d 712,

714 (5th Cir.1995).

          A claim of wrongful disclosure under § 7431 requires (1) that

the   IRS    disclosed   confidential      tax    return   information   either

knowingly or negligently, and (2) that this disclosure was not

authorized by § 6103 of the Internal Revenue Code.                 26 U.S.C. §§

6103(a), 7431(a)(1).2      Recovery will be denied however, if the IRS

acted on a "good faith but erroneous interpretation" of § 6103.              26

U.S.C. § 7431(b).        There is no dispute that the IRS disclosed

      2
          Section 7431(a)(1) reads:

              If any officer or employee of the United States
              knowingly, or by reason of negligence, discloses any
              return or return information with respect to a taxpayer
              in violation of any provision of section 6103, such
              taxpayer may bring a civil action for damages against
              the United States in a district court of the United
              States.

      26 U.S.C. § 7431(a)(1).

                                      4
Wilkerson's confidential tax return information.3               The issues
before     this   court   are   whether    §   6103(k)(6)   authorized   the

disclosures, and whether the government made the disclosures based

on a good faith interpretation of § 6103.           Because we find that §

6103(k)(6) authorized the disclosure of Wilkerson's tax return

information, we decline to reach the defense of good faith.

     The district court, interpreting § 6103 of the Internal

Revenue Code, concluded that disclosure of Wilkerson's tax return

information was unnecessary to collect Forsyth's delinquent taxes,

because in actuality Wilkerson owed no taxes and was not in fact

liable for Forsyth's tax debt.            As the district court reasoned,

because the levies themselves were not authorized by statute, the

corresponding disclosures were unnecessary and unauthorized by §

6103(k)(6). Currently a split exists among the circuits on whether

     3
         Section 6103 defines "Return Information" to include,

             a taxpayer's identity, the nature, source, or amount of
             his income, payments, receipts, deductions, exemptions,
             credits, assets, liabilities, net worth, tax liability,
             tax withheld, deficiencies, overassessments, or tax
             payments ... or any other data, received by, recorded
             by, prepared by, furnished to, or collected by the
             Secretary with respect to a return or with respect to
             the determination of the existence, or possible
             existence, of liability (or the amount thereof) of any
             person under this title for any tax, penalty, interest,
             fine, forfeiture, or other imposition, or offense ...

     26 U.S.C. § 6103(b)(2)(A). The IRS disclosed Wilkerson's
     social security number, employee identification number,
     business interests, and amount of alleged tax liability.
     This information was collected by the IRS "with respect to
     the determination of the existence, or possible existence,
     of liability" and thus falls within the statutory definition
     of return information which is to be kept confidential under
     § 6103(a).

                                      5
the illegality of the underlying collection activity has an effect

on the legality of the disclosures flowing out of such activity.4

The district court followed the Eighth Circuit which has held that

"a   disclosure      in     pursuance     of       an   unlawful     levy    violates     the

confidentiality        requirements          of      section     6103(a)     and   is     not

authorized under section 6103(k)(6)."                        Rorex v. Traynor, 771 F.2d
383, 386 (8th Cir.1985);             see Husby v. United States, 672 F. Supp.
442, 445 (N.D.Cal.1987) (following Rorex ).                               The Rorex court

determined     that       allowing    the      IRS      to   avoid   liability     for    its

wrongful disclosures by simply including them in a notice of levy

would substantially defeat the confidentiality requirement of §

6103.       Rorex, 771 F.2d    at     386.        Because      we   feel   that    this

interpretation misreads the provisions in question, we decline to

follow Rorex.

          The plain language of the Internal Revenue Code supports the

government's      contention         that    the        validity     of    the   underlying

collection      activity       is    irrelevant          in    determining       whether    a

disclosure is wrongful.             Section 6103 sets forth the general rule

      4
      Compare Rorex v. Traynor, 771 F.2d 383 (8th Cir.1985)
(holding that disclosures contained in unlawful levy violate §
6103(k)(6)) with Venen v. United States, 38 F.3d 100 (3d
Cir.1994) (declining to consider the validity of the underlying
levy in determining whether disclosures violated § 6103(k)(6));
Farr v. United States, 990 F.2d 451 (9th Cir.), cert. denied, ---
U.S. ----, 114 S. Ct. 634, 126 L. Ed. 2d 592 (1993) (holding that
where disclosures were necessary to the collection procedure,
fact that collection procedures may have been defective does not
make the disclosures wrongful); Huff v. United States, 10 F.3d
1440 (9th Cir.1993), cert. denied, --- U.S. ----, 114 S. Ct. 2706,
129 L. Ed. 2d 834 (1994) (holding that possible procedural lapses
in collection process will not render disclosures necessary to
collection wrongful).

                                               6
that the government may only disclose tax return information in

certain     narrow   instances.5     Section   6103(k)(6)   provides   for

disclosure "in connection with collection activity ... or with

respect to the enforcement of any other provision of this title."

26 U.S.C. § 6103(k)(6).6     Pursuant to this provision, the Secretary

of the Treasury promulgated regulations permitting disclosures in

applying "the provisions of the Code relating to establishment of

liens against [a taxpayer's] assets, or levy on, or seizure, or

sale of, the assets to satisfy any [outstanding tax] liability."

26 C.F.R. § 301.6103(k)(6)-1(b)(6).         At no place in the Internal

Revenue Code does Congress make the propriety of those disclosures

conditional upon the ultimate propriety of the levy.           The plain

language of these sections authorizes disclosures to the extent

necessary to effectuate a levy.          Venen v. United States, 38 F.3d
5
      Section 6103(a) provides, "Returns and return information
shall be confidential, and except as authorized by this title ...
no officer or employee of the United States ... shall disclose
any return or return information." 26 U.S.C. § 6103(a).
     6
         Section 6103(k)(6) reads:

             An internal revenue officer or employee may, in
             connection with his official duties relating to any
             audit, collection activity or civil or criminal tax
             investigation or any other offense under the internal
             revenue laws, disclose return information to the extent
             that such disclosure is necessary in obtaining
             information which is not otherwise reasonably
             available, with respect to the correct determination of
             tax, liability for tax, or the amount to be collected
             or with respect to the enforcement of any other
             provision of this title. Such disclosures shall be
             made only in such situations and under such conditions
             as the Secretary may prescribe by regulation.

     26 U.S.C. § 6103(k)(6).

                                     7
100, 106 (3d Cir.1994).

     The     statutory    scheme   further   supports   the   government's

position.      Congress    enacted   separate   and   distinct   provisions

concerning collection activities and information handling.             When

the IRS issues a wrongful levy on a taxpayer's property, § 7426

provides damages which are distinct from those allowed under § 7431

for wrongful disclosures. Section 7426 allows recovery of what the

IRS actually received or "seized" from its wrongful levies.              26

U.S.C. § 7426(b)(2).7       See Three "M" Investments, Inc. v. United

States, 781 F.2d 352, 353 (10th Cir.1986) (noting that section

7426(b)(2) was not meant to be compensatory);             Hammond Co. v.

United States, 568 F. Supp. 309, 313 (S.D.Cal.1983) (same). Section

7431 covering wrongful disclosures, however, allows recovery of

compensatory damages.      26 U.S.C. § 7431(c)(1)(B)(I).         If Congress

had intended to allow recovery of compensatory damages in the

     7
         In relevant part § 7426(b)(2) reads:

             If the court determines that such property has been
             wrongfully levied upon, the court may—

                  (A) order the return of specific property if the
             United States is in possession of such property;

                  (B) grant a judgment for the amount of money
             levied upon; or

                  (C) if such property was sold, grant a judgment
             for an amount not exceeding the greater of—

                  (i) the amount received by the United States from
                  the sale of such property, or

                  (ii) the fair market value of such property
                  immediately before the levy.

     26 U.S.C. § 7426(b)(2).

                                      8
ordinary wrongful levy case, they would have so stated in § 7426.

Holding    that   disclosures      necessary      to     effectuate         a    levy

automatically become wrongful upon a finding that the levy was

deficient in some way, would effectively read out of the Internal

Revenue Code the distinct damage remedies that Congress provided.8

     The   foregoing   analysis     indicates     that        Congress   intended

collection   activities,    such    as    levying,      to    be   distinct       from

information handling.      We see no reason to conflate them.                   As the

Third Circuit     noted,   "[t]hese      two   bodies    of    law   must       remain

distinct."    Venen, 38 F.3d at 106.           Accordingly, we decline to

follow Rorex, and join the Third and Ninth Circuits in holding that

the validity of the underlying collection activity is not relevant

in determining whether the disclosures of tax return information

were wrongful.9

     8
      Further support for the government's position comes from
the fact that § 7433 does allow a victim of unreasonable
collection activities to recover "actual, direct economic
damages," but only if the IRS's conduct was reckless or
intentionally wrongful. If we were to hold that disclosures
necessary to effectuate levies become wrongful when the levies
are adjudged deficient, then this section would essentially
become a nullity. See Venen, 38 F.3d at 106 (analyzing the
interaction between §§ 7431 and 7433).
     9
      Liability under § 7431(a)(1) requires that the IRS made the
disclosures "knowingly, or by reason of negligence." We note
that the district court found the disclosures negligent due to
the IRS agent's failure to gather sufficient evidence and consult
an attorney before concluding that Wilkerson and Forsyth had a
common-law marriage. For the reasons stated in this opinion, we
believe that the district court misread the requirements of §
7431. The district court's analysis ties the scienter
requirement of § 7431 directly to the propriety of the underlying
levies. The plain language of the statute states that the
disclosures must be done either negligently or knowingly "in
violation of any provision of section 6103." 26 U.S.C. §
7431(a)(1). This is an independent inquiry. A finding that the

                                      9
     Accordingly, we hold that § 6103(k)(6) authorized the IRS's

disclosure of Wilkerson's tax return information, and thus the

disclosures   were   not   wrongful.10   As   was   the   case   in   Venen,
Wilkerson's claim is based on improper levying procedures, not on

improper information handling.       The IRS issued levies to collect

Forsyth's delinquent taxes. Pursuant to § 6103(k)(6) and 26 C.F.R.

§ 301.6103(k)(6)-1(b)(6), the IRS included in the Notices of Levy

Wilkerson's social security number, business interests, employee

identification number, and alleged tax liability—the information

necessary to provide effective notice of the tax liens to persons

dealing with Wilkerson.      Absent the disclosures, the Notices of

Levy would have been wholly ineffective in collecting money for

which the IRS believed Wilkerson was responsible.           The IRS thus

acted reasonably in determining that disclosure of Wilkerson's tax

return information was necessary to enforce the Internal Revenue

Code and obtain the delinquent taxes.11

underlying collection activity was done negligently does not
necessarily mean that the disclosures were also done negligently.
Cf. Huckaby v. United States Department of Treasury, 794 F.2d
1041, 1050 (5th Cir.1986), (holding IRS liable under § 7431 when
the agent should have known that the disclosures were not
authorized by the statute).
     10
      This opinion should not be construed to hold that every
claim of wrongful levy will fail to give rise to a claim of
wrongful disclosure. We hold only that proof of wrongful levy,
absent more, is legally insufficient to support a claim for
wrongful disclosure.
     11
      We distinguish Wilkerson's case from Barrett v. United
States, 51 F.3d 475, 478-79 (5th Cir.1995). In Barrett, we held
that where disclosure of tax liability was contained in letters
sent solely to obtain information, disclosure was unnecessary if
the information sought was "otherwise reasonably available."
Unlike the information sought in Barrett, there is no effective

                                    10
                                III

      The district court denied Wilkerson's Fifth Amendment claims

on the grounds that she had failed to show that the IRS acted with

sufficient malice or intent to harass to afford her recovery under

either the due process or takings clause of the Fifth Amendment.

Wilkerson argues that the court erred in requiring malice or intent

to harass before allowing recovery under the Fifth Amendment.   See

Rutherford v. United States, 702 F.2d 580, 583-84 (5th Cir.1983)

(holding that a party may be entitled to Bivens recovery under

Fifth Amendment for malicious acts of the IRS which go so far as to

infringe taxpayer's Fifth Amendment liberty interest).   We decline

to determine the scope of Rutherford because we find that the

district court lacked jurisdiction to decide Wilkerson's Fifth

Amendment claims.

      The United States is immune from suit except as it waives its

sovereign immunity.   FDIC v. Meyer, --- U.S. ----, ----, 114 S. Ct.
996, 1000, 127 L. Ed. 2d 308 (1994);    United States v. Sherwood, 312
U.S. 584, 586-87, 61 S. Ct. 767, 769-70, 85 L. Ed. 1058 (1941).

Congress sets forth the terms of those waivers and courts may not
exercise subject matter jurisdiction over a claim against the

federal government except as Congress allows.      United States v.

Orleans, 425 U.S. 807, 814, 96 S. Ct. 1971, 1976, 48 L. Ed. 2d 390

(1976);   Drake v. Panama Canal Comm'n, 907 F.2d 532, 534 (5th

Cir.1990);   Ware v. United States, 626 F.2d 1278, 1286 (5th

way to design Notices of Levy without disclosing tax return
information.

                                11
Cir.1980).     Waivers   of   sovereign   immunity   must   be   strictly

construed.    Sherwood, 312 U.S. at 590, 61 S.Ct. at 771.

     The Tucker Act, 28 U.S.C. §§ 1346(a)(2) and 1491(a), vests

concurrent jurisdiction in the United States Court of Federal

Claims ("Court of Claims") and the federal district courts over any

"claim against the United States, not exceeding $10,000 in amount

founded either upon the Constitution, or any Act of Congress, or

any regulation of an executive department, or upon any express or

implied contract with the United States."     28 U.S.C. § 1346(a)(2).

For claims that exceed $10,000, the Tucker Act grants exclusive

jurisdiction to the Court of Claims.      28 U.S.C. § 1491(a);      Amoco

Production Co. v. Hodel, 815 F.2d 352, 358 (5th Cir.1987), cert.

denied, 487 U.S. 1234, 108 S. Ct. 2898, 101 L. Ed. 2d 932 (1988).         We

have consistently refused to allow district courts to adjudicate

issues which belong solely to the Court of Claims, even though some

other statute conferring jurisdiction would otherwise allow the

district court to hear the case.    Amoco Production, 815 F.2d at 358

(citing Graham v. Henegar, 640 F.2d 732, 734-35 & n. 6 (5th

Cir.1981)).   As we have stated, "The law of this circuit is clear:
the Court of Claims has exclusive jurisdiction of a Tucker Act

claim in excess of $10,000."     Ware, 626 F.2d at 1287.

      Wilkerson claims that either the government engaged in a

taking of her property without just compensation, or deprived her

of her property and liberty interests without due process of law.

Wilkerson seeks $1,146,006.00 as recompense for these alleged

wrongs.   Because Wilkerson's claims are against the United States,

                                   12
based on the Constitution, and for money damages in excess of

$10,000, the Tucker act does not allow the district court to hear

this case.12    Indeed, we can find no statute allowing Wilkerson to
bring her claims in district court.13   Pursuant to the Tucker Act,
Wilkerson should have brought her Fifth Amendment claims in the

Court of Claims.     Amoco Production, 815 F.3d at 368;   Ware, 626
F.2d at 1287.

     12
      Wilkerson also argues that 28 U.S.C. § 1346(a)(1) provides
the district court with jurisdiction over her Fifth Amendment
claims. Section 1346(a)(1), however, only allows the district
court to hear suits to recover "any internal-revenue tax alleged
to have been erroneously or illegally assessed or collected, or
any penalty claimed to have been collected without authority or
any sum alleged to have been excessive or in any manner
wrongfully collected under the internal-revenue laws." 28 U.S.C.
§ 1346(a)(1). This language applies only to suits to recover
money wrongfully paid to the IRS. Here Wilkerson seeks damages
under the Fifth Amendment for the constructive taking of her
business, a claim outside the scope of § 1346(a)(1). See United
States v. Williams, --- U.S. ----, ----, 115 S. Ct. 1611, 1618,
131 L. Ed. 2d 608 (1995) (holding that § 1346(a)(1) allows a person
from whom taxes were wrongfully collected to sue for a refund of
those taxes).
     13
      Wilkerson argues in the alternative that 28 U.S.C. §
1367(a) allows the court to hear her Fifth Amendment claims on
the basis of supplemental jurisdiction—as part of the same case
or controversy as her tax claims. Section 1367(a), however,
deals only with the federal courts' power to exercise subject
matter jurisdiction over certain claims and does not operate as a
waiver of the United States sovereign immunity. Sovereign
immunity and subject matter jurisdiction are distinct doctrines.
Section 1367(a) essentially codified the common law doctrine of
pendant jurisdiction; Baker v. Farmers Elec. Co-Op, Inc., 34
F.3d 274 (5th Cir.1994); which allows litigants in federal court
to join state claims with their federal claims where the claims
are so related that they "form part of the same case or
controversy under Article III of the United States Constitution."
28 U.S.C. § 1367(a). As we have previously held, the doctrine of
pendant jurisdiction cannot be used to waive the United States'
sovereign immunity unless Congress specifically allows it. Ware,
626 F.2d at 1286 (quoting Sanborn v. United States, 453 F. Supp.
651, 655 & n. 5 (E.D.Cal.1977)). Here there is no waiver except
to have the claims heard in the Court of Claims.

                                  13
                                          IV

        Section 7430 authorizes the award of attorney's fees and

costs   to     prevailing      parties     in        tax    litigation.         Section

7430(c)(4)(A) defines "prevailing party" as any party who (1)

establishes     that   the     position    of    the        United   States    was   not

"substantially justified," and (2) "substantially prevails" as to

the amount in controversy or as to the "most significant issue or

set of issues presented."         28 U.S.C. § 7430(c)(4)(A);                Heasley v.

Commissioner, 967 F.2d 116, 122 (5th Cir.1992). The district court

found   that    the    IRS's    position        in    this     litigation      was   not

substantially justified and that Wilkerson had prevailed on the

most significant issues in the case—wrongful levy and wrongful

disclosure.        We review the district court's grant of attorney's

fees under § 7430 for abuse of discretion.                     Heasley, 967 F.2d at

120, 123.      We can only reverse "if we have a definite and firm

conviction that an error of judgment was committed."                          Lennox v.

Commissioner, 998 F.2d 244, 248 (5th Cir.1993).

        Substantially justified means "justified to a degree that

could satisfy a reasonable person."                  Id.;    Nalle v. Commissioner,
55 F.3d 189, 191 (5th Cir.1995).                     To meet this standard, the

government's position must have a reasonable basis both in law and

fact. Bouterie v. Commissioner, 36 F.3d 1361, 1367 (5th Cir.1994);

Hanson v. Commissioner, 975 F.2d 1150, 1153 (5th Cir.1992).                           In

essence,     the    inquiry    focuses     on    the        reasonableness      of   the

government's position prior to the onset of litigation.                       Nalle, 55
F.3d at 191-92.

                                          14
          The district court concluded that the IRS had based its

assumption     of    common-law   marriage     on     unreliable   information.

Further, the district court found that the IRS agents lacked any

knowledge concerning Texas marriage law, and acted without ever

consulting an attorney on the subject.              At the time the IRS made

the levies, the only definite information the agents had consisted

of uncorroborated testimony from witnesses who the IRS knew were

inimical to Forsyth or Wilkerson, or who stood to gain from their

being married, such as Forsyth's ex-wife who shared in Forsyth's

tax liability.         In addition, the investigating agent did not

consult an attorney until after issuing the Notices of Levy, and

admitted that he had no knowledge concerning Texas marriage law.

After careful review of the record, we cannot say that we have a

definite and firm conviction that the district court erred in its

finding.     Accordingly, we affirm the district court's conclusion

that the     IRS's    position    on   the   levies    was   not   substantially

justified.14    See Portillo v. Commissioner, 988 F.2d 27, 28-29 (5th

Cir.1993) (holding IRS's position not substantially justified where

they relied solely on unsupported information);              Nalle, 55 F.3d at
192 & n. 5 (citing case law which holds that the IRS is not

substantially justified where proper application of state law would

have indicated the incorrectness of the government's position).

      The second requirement under § 7430(c)(4)(A) involves whether

     14
      For the reasons stated in Part II of this opinion, we find
that the IRS's position on the disclosure of Wilkerson's tax
information was substantially justified, and therefore Wilkerson
is not entitled to attorney's fees for that portion of the case.

                                        15
Wilkerson       has   substantially        prevailed       as     to    the     amount    in

controversy or as to the "most significant issue or set of issues

presented."        28 U.S.C. § 7430(c)(4)(A).              To determine if a party

has substantially prevailed, "we look to the final outcome of the

case, whether by judgment or settlement."                       Heasley, 967 F.2d at

122.    A victory on the primary issue will suffice, and neither the

amount     of    damages       received    nor     number        of    claims     won     is

determinative.        Id.;     see Huckaby v. United States Department of

Treasury, 804 F.2d 297, 299-300 (5th Cir.1986) (holding party a

"prevailing      party"      despite   victory      on   only     one    claim     out    of

several).

       Wilkerson has prevailed on her claim of wrongful levy, but

failed on all her other claims, including wrongful disclosure.

Although     she      sought    a    greater      amount     of       damages    for     the

disclosures, that fact alone does not make the disclosure issue

most significant.         See Huckaby, 804 F.2d at 299-300 (holding that

a party was a "prevailing party" despite award of only $1,000 out

of possible $28,000 in damages). In order to determine which issue

is most significant, we must determine which issue is primary or
most nearly central to the case.                See id. at 300 (holding an issue

most significant because it was "the primary issue").                           Looking at

the gravamen of Wilkerson's complaint, the primary issue was

whether the levies on Wilkerson's property were wrongful. The bulk

of     Wilkerson's     claims       were   in     some     way    derived       from     the

wrongfulness of the levies.            For example, Wilkerson's argues that

she is entitled to recover under the Fifth Amendment because the

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levies caused her to lose her business without due process or just

compensation.        Likewise, Wilkerson based her claim of wrongful

disclosure on a theory that the wrongfulness of the levies made the

disclosures     wrongful.       Although     we   reject    this    position,

Wilkerson's complaint indicates the centrality of the levy issue.

Accordingly, we hold that the wrongful levy issue was the most

nearly central to her case.       Having prevailed on the wrongful levy

issue, Wilkerson has prevailed as to the most significant issue in

the case.

        Wilkerson is thus entitled to an award of attorney's fees and

costs as a prevailing party under § 7430 of the Internal Revenue

Code.    However, since Wilkerson has failed to prevail on any other

issue,    she   is    not   entitled    to   attorney's    fees    and   costs

attributable to those issues.          See, e.g., Powers v. Commissioner,

51 F.3d 34, 35 (5th Cir.1995) (apportioning attorney's fees under

§ 7430 based on number of issues won on appeal);           Heasley, 967 F.2d

at 123-25 (holding that the burden is on the prevailing party to

establish number of attorney hours expended, and that such hours

were reasonable).        Accordingly, we vacate the district court's
award of attorney's fees and costs and remand for a determination

of the amount of fees and costs to which she is entitled.

                                       V

     For the foregoing reasons we AFFIRM the district court's

finding of wrongful levy.       We REVERSE the district court's ruling

on wrongful disclosure and deny Wilkerson recovery based upon that

claim.      On Wilkerson's Fifth Amendment claims, we VACATE the

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district court's denial of recovery, and remand for a determination

of whether "in the interests of justice" they should be transferred

to the Court of Claims under 28 U.S.C. § 1406(a).    We VACATE the

district court's award of attorney's fees and costs and remand for

a determination of the amount of fees and costs to which she is

entitled.

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