Mottahedeh v. United States

14‐3267‐cv
Mottahedeh v. United States
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2
3
August Term 2014 4
5
(Argued: June 16, 2015 Decided: July 28, 2015) 6
7
No. 14‐3267‐cv 8
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–––––––––––––––––––––––––––––––––––– 10
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A NGELA LAVI MOTTAHEDEH , as Trustee of the Trust Agreement dated November 12
8, 1993, 13
Plaintiff‐Appellant, 14
15
‐v.‐ 16
17
U NITED S TATES OF AMERICA, 18
Defendant‐Appellee. 19
20
–––––––––––––––––––––––––––––––––––– 21
22
Before: C ALABRESI, S TRAUB , and L IVINGSTON, Circuit Judges. 23
24
Appeal from an order of the United States District Court for the Eastern 25
District of New York (Hurley, J.). Appellant filed a complaint against the United 26
States pursuant to 26 U.S.C. § 7426 seeking compensation for an alleged 27
wrongful levy. The district court granted appellee’s motion to dismiss pursuant 28
to Federal Rule of Civil Procedure 12(b)(1) because appellant’s claim was not 29
filed until after the expiration of the nine‐month statute of limitations for such 30
wrongful levy claims set forth in 26 U.S.C. § 6532(c). The district court rejected 31
appellant’s arguments that her complaint was rendered timely (1) because she 32
had previously filed a timely action in response to a prior notice of levy 33
pertaining to the same property, and (2) because the property in question was 34

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never sold. The district court also denied appellant’s request to equitably toll the 1
statute of limitations period for her claim, and denied appellant’s motion for 2
leave to amend her complaint in order to add a claim requesting a tax refund 3
pursuant to 28 U.S.C. § 1346(a). For the reasons set forth below, we AFFIRM. 4
5
MICHAEL L EVINE , Levine & Associates, P.C., 6
Scarsdale, NY, for Plaintiff‐Appellant. 7
8
A NTHONY T. S HEEHAN, (Joan I. 9
Oppenheimer, on the brief), for Caroline D. 10
Ciraolo, Principal Deputy Assistant 11
Attorney General, Washington, DC, for 12
Defendant‐Appellee. 13
14
15
D EBRA A NN L IVINGSTON, Circuit Judge: 16
On July 23, 2012, Appellant Angela Lavi Mottahedeh, acting in her 17
capacity as trustee of an irrevocable trust (the “Trust”), filed a complaint against 18
the United States pursuant to 26 U.S.C. § 7426, seeking a judgment of $2,915,000 19
in compensation for an alleged wrongful levy by the Internal Revenue Service 20
(“IRS”). The Government filed a motion to dismiss Appellant’s July 2012 21
complaint, which the district court (Hurley, J.) granted pursuant to Federal Rule 22
of Civil Procedure 12(b)(1). 23
The district court held that it was without jurisdiction to review 24
Appellant’s claim because she filed it more than nine months after the IRS served 25
her with the relevant notice of levy. Mottahedeh v. United States, 33 F. Supp. 3d 26

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210, 213‐15 (E.D.N.Y. 2014); see 26 U.S.C. § 6532(c)(1) (“[N]o suit or proceeding 1
under section 7426 shall be begun after the expiration of 9 months from the date 2
of the levy or agreement giving rise to such action.”). The district court denied 3
Appellant’s motion for leave to amend her complaint to add a claim for a tax 4
refund pursuant to 28 U.S.C. § 1346, reasoning that such claims are unavailable 5
to plaintiffs who could have brought a claim under § 7426 but for the expiration 6
of the statute of limitations. We agree that Appellant’s § 7426 claim was time 7
barred and that Appellant could not have brought a claim under § 1346. 8
BACKGROUND 9
A. Facts1 10
In 1993, Parviz Lavi (“Lavi”) created the Trust for the benefit of his 11
daughter, Angela Lavi Mottahedeh, and her two brothers, Edmund and Edward 12
Lavi. Mottahedeh was appointed trustee. In 1998, Lavi conveyed to the Trust 19 13
shares of stock in Old Cedar Development Corporation (the “Old Cedar Stock”). 14
Prior to that conveyance, the IRS had served Lavi and his wife with a notice of 15
1 The facts presented here are drawn from Appellant’s complaint and from
undisputed facts contained in materials attached to the parties’ memoranda of law
submitted to the district court. The district court did not make any findings regarding
disputed facts and instead based its conclusions solely on the facts set forth in
Appellant’s complaint and on undisputed facts contained in the other materials
submitted by the parties. See Mottahedeh, 33 F. Supp. 3d at 211.

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deficiency alleging income tax deficiencies for the tax years 1979 and 1980, as 1
well as an audit statement showing unpaid tax liability for the years 1979 2
through 1982. In August 1998, the IRS obtained a tax court judgment against 3
Lavi for the amounts he and his wife owed for the tax years 1979 and 1980. In 4
addition, in 2003, the IRS filed a notice of federal tax lien asserting a lien on any 5
property owned by Lavi in order to secure an amount Lavi allegedly owed for 6
unpaid 1978 taxes. 7
On February 11, 2009, the IRS served Appellant with a notice of levy and a 8
notice of seizure of the Old Cedar Stock, in connection with Lavi’s alleged 1978 9
tax liability. Subsequently, on August 19, 2009, the IRS sent a letter to 10
Appellant’s counsel stating that the IRS had obtained possession of the Old 11
Cedar Stock and was planning to sell it. Shortly thereafter, on August 27, 2009, 12
Appellant filed a wrongful levy claim in the United States District Court for the 13
Eastern District of New York pursuant to 26 U.S.C. § 7426, asserting that the 14
February 2009 Notice of Levy was wrongful because the Old Cedar Stock no 15
longer belonged to Lavi. Appellant sought an injunction blocking the sale of the 16
Old Cedar Stock, a judgment that the Old Cedar Stock belonged to her as trustee, 17

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and the return of the stock. In September 2009, after the district court denied her 1
motion for a preliminary injunction, Appellant voluntarily dismissed that suit. 2
Later, in October 2009, the IRS served Appellant with a new notice of levy 3
and notice of seizure of the Old Cedar Stock. Unlike the prior notice of levy, this 4
October 2009 Notice of Levy was filed in connection with the judgment obtained 5
against Lavi for an income tax deficiency from 1979 and 1980. Soon after issuing 6
the October 2009 Notice of Levy and Notice of Seizure, the IRS notified the Old 7
Cedar Development Company that it had “officially seized” the certificate for the 8
Old Cedar Stock. J.A. 228. On July 28, 2010, Appellant elected to pay the alleged 9
tax liability under protest. Nonetheless, on September 2, 2010, the IRS issued a 10
notice of public auction sale and threatened to conduct a sale of the Old Cedar 11
Stock on September 29, 2010. However, no sale of the Old Cedar Stock ever 12
occurred. 13
B. Procedural History 14
On July 23, 2012, nearly three years after the October 2009 Notice of Levy, 15
Appellant filed a complaint under 26 U.S.C. § 7426 seeking a judgment of 16
$2,915,000 in compensation for the amount allegedly paid in response to the 17
IRS’s “wrongful levy and threatened sale” of the Old Cedar Stock. J.A. 216. The 18

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Government moved to dismiss the complaint pursuant to Rules 12(b)(1) and 1
12(b)(6), arguing that Appellant’s § 7426 action was untimely pursuant to 26 2
U.S.C. § 6532(c) because it had been brought more than nine months after the 3
October 2009 Notice of Levy. Appellant disagreed, and also requested leave to 4
add a claim pursuant to 28 U.S.C. § 1346(a)(1), which permits civil actions against 5
the United States “for the recovery of any internal‐revenue tax alleged to have 6
been erroneously or illegally assessed or collected, or any penalty claimed to 7
have been collected without authority . . . under the internal‐revenue laws.” The 8
district court denied Appellant’s request for leave to amend her complaint, and 9
granted the Government’s motion to dismiss pursuant to Rule 12(b)(1). 10
Mottahedeh, 33 F. Supp. 3d at 212 n.1, 213‐15 (E.D.N.Y. 2014). 11
DISCUSSION 12
Citing 26 U.S.C. § 6532(c), the Government argues that its waiver of 13
sovereign immunity permitting a wrongful levy suit to be filed under 26 U.S.C. 14
§ 7426 is conditioned on such a suit being brought within nine months of the date 15
on which the pertinent notice of levy is filed. Section 6532(c)(1) provides in 16
relevant part that “no suit or proceeding under section 7426 shall be begun after 17
the expiration of 9 months from the date of the levy . . . giving rise to such 18

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action.” The Government asserts that Appellant’s suit, which was not brought 1
until more than two years after the October 2009 Notice of Levy was filed, is 2
therefore time barred. 3
Appellant makes four arguments in response. First, she asserts that 4
because she previously commenced in a timely fashion a § 7426 action in 5
response to the February 2009 Notice of Levy, which pertained to the same 6
property as the October 2009 Notice of Levy, she satisfied the statute of 7
limitations requirement set forth in 26 U.S.C. § 6532(c) so that her July 2012 8
action was timely. Second, she contends that because the Government never 9
actually sold the Old Cedar Stock, no “levy” triggering the start of the nine‐ 10
month period provided for by 26 U.S.C. § 6532(c) actually occurred. Third, 11
Appellant argues that the statute of limitations should be equitably tolled 12
because the tax lien that the IRS filed in 2003 and the February 2009 Notice of 13
Levy both asserted that Appellant was liable for considerably smaller amounts 14
than the tax payment that the IRS sought in connection with the October 2009 15
levy. Fourth, she asserts that the district court should have permitted her to 16
amend her complaint to assert an additional claim under 28 U.S.C. § 1346(a). We 17
reject each of these arguments and conclude that the district court correctly 18

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dismissed Appellant’s present action for lack of subject matter jurisdiction and 1
did not abuse its discretion in denying her motion for leave to amend. 2
* * * 3
“We review de novo a dismissal for lack of subject matter jurisdiction 4
where,” as here, “the trial court dismissed on the basis of the complaint alone or 5
the complaint supplemented by undisputed facts from the record.” 6
Mackensworth v. S.S. Am. Merch., 28 F.3d 246, 252 (2d Cir. 1994). “We review a 7
district court’s denial of leave to amend for abuse of discretion, unless the denial 8
was based on an interpretation of law, such as futility, in which case we review 9
the legal conclusion de novo.” Panther Partners Inc. v. Ikanos Commc’ns, Inc., 681 10
F.3d 114, 119 (2d Cir. 2012). 11
A. Appellant’s Prior Action Does Not Render Her Present Claim Timely 12
Contrary to Appellant’s assertions, the fact that she previously commenced 13
a suit in response to a prior notice of levy pertaining to the same property does 14
not render her present action timely. 26 U.S.C. § 6532(c)(1) provides that, except 15
in the case of certain specific circumstances that do not exist here, “no suit or 16
proceeding under section 7426 shall be begun after the expiration of 9 months 17
from the date of the levy or agreement giving rise to such action.” The actions 18

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filed by Appellant in August 2009 and July 2012 are clearly two separate “suit[s] 1
or proceeding[s]” that were prompted by different notices of levy. The 2
complaint Appellant filed in August 2009 refers to the February 2009 Notice of 3
Levy, while the complaint Appellant filed in July 2012 refers to the October 2009 4
Notice of Levy. Accordingly, the plain language of 26 U.S.C. § 6532(c)(1) 5
forecloses her argument that the August 2009 suit rendered the July 2012 action 6
timely. 7
B. A “Levy” Occurred that Triggered the § 6532(c) Statute of Limitations 8
Period 9
10
Alternatively, Appellant contends that the statute of limitations period set 11
forth in 26 U.S.C. § 6532(c) never commenced on the theory that because the 12
Government never sold the Old Cedar Stock, no “levy” occurred at all. But this 13
argument runs contrary to this Court’s holding in Williams v. United States that 14
“service of the notice of levy on the possessor of the property triggers the 15
running of the statute of limitations for purposes of section 6532(c).” 947 F.2d 37, 16
39 (2d Cir. 1991). Appellant relies on the Supreme Court’s statement in EC Term 17
of Years Trust v. United States that “a levy . . . is a ‘legally sanctioned seizure and 18
sale of property.’” 550 U.S. 429, 431 (2007) (quoting Black’s Law Dictionary 926 19
(8th ed. 2004)). The Court in EC Term of Years Trust, however, did not purport in 20

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this sentence to define “levy” for purposes of 26 U.S.C. § 6532(c). That issue was 1
not before the Court. 2
The text of 26 U.S.C. § 7426, moreover, makes clear that no sale need take 3
place for a “levy” to have occurred within the meaning of § 7426 and § 6532(c). 4
Section 7426(a)(1), for example, provides that an action may be brought “[i]f a 5
levy has been made on property or property has been sold pursuant to a levy,” 6
indicating that a levy can occur even when the property is not sold. (Emphasis 7
added). Further, it states that (1) “any person . . . who claims an interest in . . . 8
such property” that “was wrongfully levied upon may bring a civil action 9
against the United States,” and (2) “[s]uch action may be brought without regard 10
to whether such property has been surrendered to or sold by the Secretary.” Id. 11
(emphasis added). In addition, § 7426(b) authorizes certain forms of relief, such 12
as an injunction prohibiting the sale of property, which would not make sense if 13
a levy occurred only upon the property’s sale. Because § 6532(c) provides the 14
statute of limitations for suits brought pursuant to § 7426 and does not separately 15
define “levy,” there is no reason to believe that “levy” as used in § 6532(c) 16
intends a meaning that is any different from the meaning of the term as used in 17
§ 7426. Thus, a property need not have been sold in order for a “levy” to have 18

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occurred under § 6532(c), and the fact that the Government never sold the Old 1
Cedar Stock does nothing to render Appellant’s claim timely. 2
C. Equitable Tolling Is Not Appropriate in This Case 3
Appellant next argues that the statute of limitations should have been 4
equitably tolled. This argument is unavailing. Even if the doctrine of equitable 5
tolling could be appropriately invoked for Appellant’s § 7426 claim—a question 6
we need not address—Appellant has not pled facts that support her claim that 7
this case warrants equitable tolling. “Generally, a litigant seeking equitable 8
tolling bears the burden of establishing two elements: (1) that he has been 9
pursuing his rights diligently, and (2) that some extraordinary circumstance 10
stood in his way.” Pace v. DiGuglielmo, 544 U.S. 408, 418 (2005), quoted in A.Q.C. 11
ex rel. Castillo v. United States, 656 F.3d 135, 144 (2d Cir. 2011). 12
Here, Appellant has neither alleged that anything prevented her from 13
commencing a timely suit in response to the October 2009 Notice of Levy, nor 14
that she pursued her remedies diligently. She asserts that equitable tolling 15
should apply because the lien the Government placed on the Old Cedar Stock in 16
2003 and the original February 2009 Notice of Levy both asserted that the Trust 17
was liable for a smaller amount than the amount it was ultimately required to 18

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pay in order to prevent the sale of the stock. But as Appellant herself 1
acknowledges, both the 2003 lien and the February 2009 Notice of Levy pertained 2
to Lavi’s allegedly unpaid taxes from 1978, whereas the October 2009 Notice of 3
Levy was filed in connection with a judgment obtained against Lavi for alleged 4
deficiencies from 1979 and 1980. Any uncertainty as to the exact amount of 5
Lavi’s alleged tax liability, moreover, did nothing to prevent Appellant from 6
bringing a claim in response to the October 2009 Notice of Levy. Yet Appellant, 7
without explanation, waited until July 2012 to file her present claim. In the face 8
of such unexplained inaction, she cannot now resort to equitable tolling. 9
D. The District Court Did Not Abuse Its Discretion in Refusing to Allow 10
Appellant to Amend Her Complaint 11
12
Finally, citing United States v. Williams, 514 U.S. 527, 531 (1995), Appellant 13
asserts that even if her § 7426 claim was time barred, the district court should 14
have granted her leave to amend her complaint in order to include a claim for a 15
tax refund pursuant to 28 U.S.C. § 1346. But while the Supreme Court held in 16
Williams that a party who had paid taxes under protest on behalf of another 17
individual was authorized to bring a claim pursuant to § 1346, the Supreme 18
Court more recently clarified that Williams was premised “on the specific 19
understanding that no other remedy, not even a timely claim under § 7426(a)(1), 20

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was open to the plaintiff in that case.” EC Term of Years Trust, 550 U.S. at 435. 1
Where, as here, a plaintiff would have otherwise been able to file an action 2
pursuant to § 7426(a)(1) but missed the deadline for filing such a claim, that 3
plaintiff “may not bring the challenge as a tax‐refund claim under § 1346(a)(1).” 4
Id. at 436. Therefore, the district court did not abuse its discretion in denying 5
Appellant leave to amend her complaint in order to add a § 1346 claim. 6
CONCLUSION 7
We have considered Appellant’s remaining arguments and we find them 8
to be without merit. For the foregoing reasons, we AFFIRM the judgment of the 9
district court. 10

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