            In the United States Court of Federal Claims
                                           No. 12-58T

                                    (Filed: December 12, 2013)


**********************************            )       Claim for tax refunds; prior suit; 28
                                              )       U.S.C. § 1500; Brandt followed; motion
GERD TOPSNIK,                                 )       for continued stay; no pressing need for
                       Plaintiff,             )       continuation
                                              )
       v.                                     )
                                              )
UNITED STATES,                                )
                                              )
                       Defendant.             )
                                              )
**********************************


       Charles H. Magnuson, Los Angeles, California for plaintiff.

       Carl D. Wasserman, Court of Federal Claims Section, Tax Division, United States
Department of Justice, Washington, D.C., for defendant. With him on the briefs were Kathryn
Keneally, Assistant Attorney General, David I. Pincus, Chief, and G. Robson Stewart, Assistant
Chief, Court of Federal Claims Section, Tax Division, United States Department of Justice,
Washington, D.C.

                                             ORDER

LETTOW, Judge.

        In this tax case, plaintiff, Gerd Topsnik, seeks a refund of income taxes paid via lien and
levy for 1992, 1993, 1999, 2000, and 2001. Mr. Topsnik is a nonresident alien as to the United
States, with a residence in Germany, who owned stock in a company located in California. That
stock was redeemed by the company in 2004, with part of the redemption price paid in monthly
installments. The Internal Revenue Service (“IRS”) levied upon these installment payments to
collect most of the taxes in dispute. At this juncture, a salient issue is a procedural matter, i.e.,
whether this court is the proper forum for plaintiff’s refund claims, or, indeed, whether any
forum is available. Related actions are pending before the United States Court of Appeals for the
Ninth Circuit and the United States Tax Court.

       Because of the earlier pendency of litigation in the United States District Court for the
Central District of California, an issue had arisen respecting the application of 28 U.S.C.
§ 1500. 1 That statute bars jurisdiction in this court of a claim by a plaintiff who has pending in
any other court a suit against or in respect of the United States concerning the same operative
facts. This case was stayed at the behest of the parties to await resolution of a comparable
jurisdictional issue in Brandt v. United States, 710 F.3d 1369 (Fed. Cir. 2013). 2 In Brandt, the
Federal Circuit decided that Section 1500 did not bar an action filed in this court after a related
action had been dismissed by a district court but before the time for appeal of that dismissal had
run. 710 F.3d at 1379. The court of appeals held that this court’s jurisdiction was not ousted by
a subsequently filed appeal in the related case because there was a “period of time when [the]
case was not, as the statute requires, ‘pending in any other court,’” and an action filed in that
interim was jurisdictionally proper. Id. The Federal Circuit denied rehearing and rehearing en
banc in Brandt, and the government has advised that it will not file a petition for certiorari in that
case. See Def.’s Notice of Decision and Mot. to Continue Stay (“Def.’s Mot.”), ECF No. 44.
Nonetheless, the government has moved to continue the stay of this action pending the outcome
of appellate proceedings in the related case pending in the Court of Appeals for the Ninth
Circuit. See id.

                                            BACKGROUND

        At issue are payments of tax for the years 1992, 1993, 1999, 2000, and 2001. Compl.
¶¶ 5, 19-22, Attach. at 23. 3 Mr. Topsnik had paid some taxes for the years 1992, 1993, and
1999, Compl. ¶ 6, but the IRS on February 13, 2004, issued a Notice of Tax Lien for additional
taxes totaling $110,003.31, allegedly due for the 1992, 1993, 1994, and 1999 tax years. Compl.
Attach. at 11. Other liens and levies were filed, and litigation in the Tax Court ensued regarding
the IRS’s collection activities, without fully resolving the disputed issues. 4 Subsequently, on


       1
           The statute provides:

       The United States Court of Federal Claims shall not have jurisdiction
       of any claim for or in respect to which the plaintiff or his assignee has
       pending in any other court any suit or process against the United States
       or any person who, at the time when the cause of action alleged in such
       suit, or process arose, was, in respect thereto, acting or professing to act,
       directly or indirectly under the authority of the United States.

28 U.S.C. § 1500.
       2
           The stay was entered by the judge to whom the case was previously assigned.
       3
         Attached to the complaint are IRS lien notices, IRS notices of intent to levy, certificates
of release of federal tax liens, and correspondence between IRS officials and Mr. Topsnik’s
counsel regarding the liens and levies. The attachment is sequentially paginated by the
electronic filing system, and citations to the attachment will reflect this pagination.
       4
        See Topsnik v. Commissioner, No. 1454-09L (Tax Court filed Jan. 21, 2009), and
Topsnik v. Commissioner, No. 19398-09L (Tax Court filed Aug. 13, 2009). A further case in the
Tax Court, Topsnik v. Commissioner, No. 26894-10L (Tax Court filed Dec. 6, 2010), was filed


                                                  2
February 16, 2010, a further notice of levy was issued by the IRS, adding amounts allegedly due
for 2000 and 2001 and adjusting the total sought to $257,224.97. Compl. Attach. at 26.

         On August 23, 2011, Mr. Topsnik filed a complaint in the United States District Court for
the Central District of California seeking damages respecting the IRS’s collection activities and a
refund of taxes paid. Compl., Topsnik v. United States, No. 2:11-cv-6958-JHN-MRW (C.D. Cal.
filed Aug. 23, 2011). Mr. Topsnik alleged that he was a non-resident alien who resided in
Germany. Id. ¶ 2. The government filed a motion to dismiss, among other things contending
that venue with respect to both the damages and refund claims lay in the judicial district where
Mr. Topsnik resided and that, because Mr. Topsnik resided outside the United States, venue lay
with the Court of Federal Claims. See Order Granting Def.’s Mot. to Dismiss, Topsnik v.
United States, No. 2:11-cv-06958-JHN-MRW (C.D. Cal. Jan. 17, 2012). 5 The district court
ruled that venue was improper, citing 28 U.S.C. § 1402(a)(1), and granted the motion to dismiss
without prejudice to Mr. Topsnik’s refiling suit in the Court of Federal Claims. Id. at 2-3. 6
Mr. Topsnik’s motion to amend the district court’s order of dismissal to provide for transfer
to this court was unsuccessful. See Order Denying Pl.’s Mot. to Amend Judgment, Topsnik v.
United States, No. 2:11-cv-06958-JHN-MRW (C.D. Cal. Apr. 2, 2012).

       Mr. Topsnik filed the instant suit in this court on January 30, 2012, and subsequently, on
March 16, 2012, filed an appeal from the district court’s dismissal, which appeal remains
pending in the Court of Appeals for the Ninth Circuit. See Answering Brief for the United




late in 2010. Each of these cases was dismissed for either lack of jurisdiction or mootness,
without reaching the merits.
       5
        A copy of the district court’s order granting the government’s motion to dismiss has
been submitted in the docket of the instant case as ECF No. 9-2, pp.1-3.
       6
           The district court reasoned that

       Plaintiff here does not reside in any judicial district since he currently resides
       in Germany. Accordingly, under § 1402(a)(1), . . . Plaintiff’s only recourse is
       to prosecute his claim in the United States Claims Court, which has concurrent
       jurisdiction over tax refund actions. Krapf v. United States, 604 F. Supp. 1164,
       1165 (D. Del. 1985) (“Despite the fact that the venue provisions of 28 U.S.C.
       § 1402(a)(1) preclude litigation of Plaintiffs’ claim in any district court,
       Plaintiffs are not deprived of a forum. Under 28 U.S.C. § 1346(a)(1), the
       United States Claims Court exercises concurrent jurisdiction with the district
       courts to hear federal tax refund suits.).

Order Granting Def.’s Mot. to Dismiss at 2, Topsnik v. United States, No. 2:11-cv-06958-JHN-
MRW.



                                                3
States, Topsnik v. United States, No. 12-55533 (9th Cir. Feb. 4, 2013), submitted by notice in the
instant case, ECF No. 41. 7

                               STANDARD FOR DECISION

         “[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants.” Landis v. North Am. Co., 299 U.S. 248, 254 (1936). “When and how
to stay proceedings is within the sound discretion of the trial court.” Cherokee Nation of Okla. v.
United States, 124 F.3d 1413, 1416 (Fed. Cir. 1997). This discretion, however, is not
unbounded. Id. (citing Hendler v. United States, 952 F.2d 1364, 1380 (Fed. Cir. 1991)). A stay
that is “‘immoderate or indefinite’ may be an abuse of discretion.” Id. (quoting Landis, 299 U.S.
at 257 (“The stay is immoderate and hence unlawful unless so framed in its inception that its
force will be spent within reasonable limits, so far at least as they are susceptible of prevision
and description.”)); see also Landis, 299 U.S. at 255 (“[A] stay of indefinite duration in the
absence of a pressing need” may constitute an abuse of discretion.). Ultimately, a court must
exercise its own judgment to “weigh competing interests and maintain an even balance” among
those fulfilled by a stay and those frustrated by such action. Cherokee Nation, 124 F.3d at 1416
(quoting Landis, 299 U.S. at 255). As the Federal Circuit has said, “[o]verarching this balancing
is the court’s paramount obligation to exercise jurisdiction timely in cases properly before it.”
Id.

        “The proponent of a stay bears the burden of establishing its need.” Clinton v. Jones, 520
U.S. 681, 708 (1997). To justify suspending the regular course of litigation, the proponent “must
make out a clear case of hardship or inequity in being required to go forward, if there is even a
fair possibility that the stay for which he prays will work damage to someone else.” Landis, 299
U.S. at 255.

                                          ANALYSIS

        The government seeks a continuation of the stay until resolution by the Ninth Circuit of
the appeal by Mr. Topsnik currently pending before that court. See Def.’s Mot. at 2. The
government argues that this result would be consistent with the “first-filed rule,” which should
be applied “in a manner serving sound judicial administration.” Id. (quoting Orthmann v. Apple
River Campground, Inc., 765 F.2d 119, 121 (8th Cir. 1985)). The government suggests that the
issues pending before the Ninth Circuit and this court are similar and that resolution of the appeal
by the Ninth Circuit would serve judicial economy. Id. at 1-3.

        Earlier, in opposing defendant’s motion to continue the stay because of the Brandt
proceedings, Mr. Topsnik emphasized that the district court had failed to invoke the transfer
provisions of 28 U.S.C. § 1404(a) relating to transfer to cure an improper venue. He argued that
“[p]laintiff’s offer . . . of transfer to a forum of [d]defendant’s choosing [, i.e., the Court of

       7
        Additionally, in the Tax Court, Mr. Topsnik has pending a suit, Topsnik v.
Commissioner, No. 22577-11 (Tax Court filed Oct. 3, 2011), which relates to tax years 2004
through 2009. See Hr’g Tr. 12:8-12 (Oct. 3, 2013).


                                                 4
Federal Claims] has been met with silence.” Pl.’s Resp. to Def.’s Mot. to Continue the Stay at 2,
ECF No. 38. He objected to continuation of the stay because of the government’s arguably
inconsistent positions on jurisdiction and whether the instant case should proceed. Id. Now that
Brandt is settled law in the Federal Circuit, and the jurisdictional cloud attributable to Section
1500 has been cleared, Mr. Topsnik has advised that a venue ruling by the Ninth Circuit would
be beneficial. See Pl.’s Resp. to Def.’s Mot. to Continue the Stay at 1, ECF No. 45.

        No venue issue is before this court. Indeed, nothing this court might do, either to
continue the stay or to lift it, would or could affect the venue issue now before the Ninth Circuit.
Instead, the question presented to this court is whether this litigation should be held in abeyance
to await a purely procedural ruling by the Ninth Circuit on venue when this court unquestionably
has subject matter jurisdiction over Mr. Topsnik’s refund claim and can proceed to address the
merits.

        Because this litigation concerns income taxes paid as far back as the 1992 and 1993 tax
years, over twenty years in the past, time is a strong consideration favoring lifting the stay. A
countervailing factor rests in the fact that this court can only address Mr. Topsnik’s refund
claims, not also his claims for civil damages for improper lien and collection actions under 26
U.S.C. §§ 7432 and 7433. 8 This latter consideration is weakened, however, by the government’s
position that Mr. Topsnik’s damages claims are merely refund claims in disguise. The District
Court for the Central District of California did not address the proper venue for Mr. Topsnik’s
claims under Sections 7432 and 7433. The district court’s order dismissing Mr. Topsnik’s
claims relied solely on the interaction of 28 U.S.C. § 1346 and 28 U.S.C. § 1402. See Order
Granting Def.’s Mot. to Dismiss at 2, Topsnik v. United States, No. 2:11-cv-06958-JHN-MRW. 9
       8
           In pertinent part, Section 7432 provides:

                 If any officer or employee of the Internal Revenue Service knowingly,
                 or by reason of negligence, fails to release a lien under section 6325 on
                 property of the taxpayer, 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. § 7432(a). Correlatively, Section 7433 provides:

                 If, 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. Such taxpayer may bring a civil action for damages against the
                 United States in a district court of the United States. Except as provided
                 in section 7432, such civil action shall be the exclusive remedy for
                 recovering damages resulting from such actions.

       26 U.S.C. 7433(a).
       9
        Section 1346 provides the district courts with concurrent jurisdiction with the Court of
Federal Claims over “any civil action against the United States for the recovery of any internal-


                                                   5
That focus was understandable because Mr. Topsnik’s complaint and amended complaint in the
district court made no allegation of specific economic losses or other damages attributable to the
IRS’s collection activities. 10

        Factually, this case bears at least a few similarities to those arising in Cherokee Nation.
There also, a stay was issued because a related quiet-title action was pending in another court
and the stay-issuing court considered that its order would avoid duplicative litigation and
conserve judicial resources. Cherokee Nation, 124 F.3d at 1416. The court of appeals reversed,
however, concluding that these concerns fell short of “the ‘pressing need’ required when a trial
court seeks to suspend its proceedings indefinitely.” Id. at 1416-17. The court considered that
obtaining a result in the quiet-title proceedings was not essential to the resolution of the claims
pending before the stay-issuing court. Id.

        In this instance, the stay sought is not quite indefinite, depending instead upon the timing
of a ruling by the Ninth Circuit. Nonetheless, the government has taken, and continues to take,
the position that a ruling by the Ninth Circuit would be of limited value. It argued to the Ninth
Circuit that “the actual relief being sought by taxpayer is a refund of taxes that he alleges were
erroneously or illegally collected, and the proper forum for a refund suit by a nonresident
taxpayer is the United States Court of Federal Claims.” Answering Brief for the United States
at 47, Topsnik v. United States, No. 12-55533 (9th Cir. Feb. 4, 2013). This contention is
inconsistent with continuation of the stay. Indeed, lifting the stay would advance this position
taken by the government before the Ninth Circuit and potentially lead to an earlier resolution of
this tax dispute.

       No pressing or evident need arises to delay further this proceeding over income taxes for
years dating back to 1992. Continuation of the stay has not been justified.


revenue tax alleged to have been erroneously or illegally assessed or collected.” 28 U.S.C.
§ 1346(a)(1). Section 1402 provides that claims arising under Section 1346 “may be prosecuted
only . . . in the judicial district where the plaintiff resides.” 28 U.S.C. § 1402(a). Claims arising
under Sections 7432 and 7433 are not governed by Section 1346, and so venue as to those claims
is not limited by Section 1402.
       10
          In the Ninth Circuit, the government maintains that Mr. Topsnik’s damages claims are
really refund claims, and so venue is limited by Section 1402. The government argues that “a
suit to recover a sum that was excessive or wrongfully collected is a suit for refund, not a suit for
damages. . . . Entirely missing from taxpayer’s amended complaint is an allegation that he
suffered any additional injury that would not be compensated by a tax refund.” Answering Brief
for the United States, Topsnik v. United States, No. 12-55533, at 22-23 (9th Cir. Feb. 4, 2013).
           In its answering brief to Mr. Topsnik’s appeal in the Ninth Circuit, the government
states that “[i]f a taxpayer believes that illegal IRS collection activity has caused him to sustain
actual, direct economic damages then he can attempt to recover those damages by filing a
damages suit in the district court of any judicial district with a substantial connection to the
underlying collection events. The Court of Federal Claims lacks jurisdiction over damages
actions.” Answering Brief for the United States, Topsnik v. United States, No. 12-55533, at 22
(9th Cir. Feb. 4, 2013).


                                                  6
                                    CONCLUSION

        The government’s motion for continuation of the stay previously entered is DENIED, and
the stay is LIFTED. To date, the government has not filed an answer in this case. 11 Its answer
shall be due on or before February 4, 2014.

       It is so ORDERED.

                                           s/ Charles F. Lettow
                                           Charles F. Lettow
                                           Judge




       11
         A motion to dismiss filed by the government on June 1, 2012, ECF No. 9, was premised
on Section 1500. As noted in Brandt, the Federal Circuit rejected the government’s comparable
arguments respecting the application of Section 1500 to cases such as this one. The
government’s motion to dismiss is accordingly DENIED. Other motions dependent on the
outcome in Brandt, i.e., ECF Nos. 19, 33, and 35, are DENIED as moot.


                                              7
