United States Court of Appeals, District of Columbia Circuit
May 10, 2017
from the United States District Court for the District of
Columbia No. 1:16-cv-01461
M. Peterson argued the cause for appellant. With him on the
briefs were Michael K. Tomenga and Peter J. Bogard.
Jennifer M. Rubin, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief was
Jonathan S. Cohen, Attorney.
Before: Tatel, Brown, and Griffith, Circuit Judges.
case involves subjects often associated with controversy and
temptation: alcohol, tobacco, and taxes. But the case turns
on some fairly straightforward issues of statutory
interpretation, not sin.
Coast Maritime Supply, Inc. ("Gulf Coast") had a
tobacco export warehouse permit (the "tobacco
permit"), and separate permits to import and wholesale
alcohol (the "alcohol permits"). Essentially, these
permits immunize Gulf Coast from penalties-and in the case of
tobacco, taxes as well-on the unauthorized sale of tobacco or
alcohol. Both permits require the Alcohol and Tobacco Tax and
Trade Bureau ("TTB") to be informed of
"any" ownership change. See J.A. 58
(tobacco permit); J.A. 70 (alcohol permit). Though the
alcohol and tobacco permits are governed under different
laws, their punchlines are the same: Failure to report any
change in ownership, without an application for a new permit
within 30 days of the ownership change, results in the
permit's automatic termination. See 27 U.S.C.
§ 204(g) (alcohol permit); 27 C.F.R. § 44.107
Coast did not inform TTB when Gulf Coast's
President/Director died and his widow received all of his
Gulf Coast shares. TTB has no record of Gulf Coast applying
for either a new tobacco or alcohol permit after his death.
Indeed, Gulf Coast proceeded as if no ownership change
occurred- continuing to use the signature stamp of its
deceased President/Director on reports submitted to TTB.
After TTB sent a letter indicating that the unreported
ownership change could subject Gulf Coast to civil and
criminal penalties, and a separate letter indicating that
Gulf Coast was liable for unpaid excise taxes for operating
under the terminated tobacco permit, Gulf Coast went to
district court seeking injunctive and declaratory relief. The
district court held Gulf Coast's tobacco permit remedies
were barred by the Anti-Injunction Act ("AIA"), and
that the district court lacked jurisdiction to review the
alcohol permits' automatic termination.
agree with the district court that the AIA prohibits Gulf
Coast's attempt to restore its terminated tobacco permit.
Gulf Coast can bring a refund suit if it disputes liability
for unpaid excise taxes. We also affirm the district
court's holding that it lacked jurisdiction over Gulf
Coast's alcohol permit claim.
Tobacco and Alcohol Permitting Schemes
warehouse permits issued by the Internal Revenue Service
("IRS") afford tobacco exporters an exemption from
federal excise taxes. See I.R.C. § 5704(b). In
order to preserve one's export warehouse permit, the
proprietor must comply with TTB regulations. See id.
One regulation relevant here is 27 C.F.R. § 44.107. This
regulation outlines what a permitted "export warehouse
proprietor" must do in the event "the issuance,
sale, or transfer of the stock of a corporation . . . results
in a change in the identity of the principal stockholders
exercising actual or legal control of the [corporation's]
operations." Id. The regulation requires the
"corporate proprietor" to "make application
for a new permit" "within 30 days after the change
[in principal stockholder identity] occurs."
Id. "[O]therwise, " the regulation says,
"the present permit shall be automatically
terminated at the expiration of such 30-day
period." Id. (emphasis added). If, however, the
proprietor timely applies for a new permit, "the present
permit shall continue in effect pending final action" on
the new permit. Id. Though the regulation does not
expressly provide for judicial review of a denied new permit
application, the Internal Revenue Code authorizes refund
actions. I.R.C. § 7422. Refund actions not only
encompass claims against tax liability, but also issues that
"hinge on precisely" whether one is liable for
taxes-such as an entity's entitlement to tax-exempt
status. See, e.g., Alexander v. "Americans
United, " Inc., 416 U.S. 752, 762 (1974).
separate type of permit, not connected to tax exemptions, is
required to import or purchase alcoholic beverages for
resale. See 27 U.S.C. § 203. Alcohol permits
are obtained through TTB; what the agency gives, it can
suspend, revoke, or annul. See id. § 204(e). In
addition, an alcohol permit "shall . . . automatically
terminate" if it is "leased, sold, or otherwise
voluntarily transferred." Id. § 204(g). If
the alcohol permit is "transferred by operation of law
or if actual or legal control of the permittee is acquired,
directly or indirectly, whether by stock-ownership or in any
other manner, by any person, then such permit shall be
automatically terminated at the expiration of thirty days
thereafter." Id. Section 204(g), like its
tobacco regulation analogue, provides a permittee with the
ability to apply for a new alcohol permit within thirty days
of the ownership change, see id., and such an
application ensures "the outstanding basic permit . . .
continue[s] in effect until such application is finally acted
on by the Secretary of the Treasury." Id.
Should the Secretary deny this application, the statute
authorizes appeals to this court (or any other circuit
court). Id. § 204(h).
both alcohol and tobacco permits, the law establishes a
process to ensure: (1) TTB would be updated of any ownership
changes; (2) permits would automatically terminate when an
unreported ownership change occurs; and (3) the permit holder
is capable of seamlessly continuing operation, despite
ownership changes, because the outstanding permit remains in
effect pending final action on a timely-submitted application
for a new permit. Judicial review is available if a new
permit is denied-a refund suit in the tobacco permit context,
and an appeal to a circuit court in the alcohol permit
context-and that review may include considering whether it
was necessary to update TTB as to a change in ownership.
both the tobacco and alcohol permit schemes, automatic
termination is a distinctive means by which a permit ceases
to operate. Both statutory frameworks reflect this, treating
the automatic termination process separately from the process
afforded to other forms of cessation.
tobacco permit context, automatic termination is governed by
its own regulatory provision. 27 C.F.R. § 44.107 speaks
only to the automatic termination process, and automatic
termination is not referenced in other provisions governing
the cessation of a tobacco permit. 26 U.S.C. § 5713(b)
requires a "show cause" hearing before TTB can
either suspend or revoke a tobacco permit, but makes no
mention of automatic termination. See id. The APA,
similarly, requires notice and an opportunity to be heard
before a license is withdrawn, suspended, revoked, or
annulled- without any reference to automatic termination.
See 5 U.S.C. § 558(c). Gulf Coast's own
tobacco permit identified automatic termination as one among
several means by which the permit could cease to operate.
See J.A. 58 ("This permit will remain in effect
. . . until suspended, revoked, automatically terminated, or
voluntarily surrendered, as provided by law and
alcohol permit scheme also treats the automatic termination
process separately. 27 U.S.C. § 204(g) sets automatic
termination apart from a permit's suspension, revocation,
annulment, or voluntary surrendering. Compare id.,
with § 204(e). Differences in an alcohol
permit's cessation leads to different postures for
judicial review. As explained above, automatically terminated
alcohol permits may be succeeded by new permits; if a new
permit application is denied, judicial review is available.
This process is distinct from judicial review of
revoked alcohol permits. See id.
(conditioning revocations on "due notice and opportunity
for [a] hearing" demonstrating that the proprietor
"willfully violated any of the" permit's
conditions). Similar to its tobacco permit, Gulf Coast's
alcohol permit distinguishes automatic termination from other
cessations, and explicitly states the statutory trigger for
automatic termination. See J.A. 70.
Coast's Ownership Change
Coast operated a tobacco export warehouse in Houston, Texas,
pursuant to a TTB permit; it also purchased alcohol products
made available for resale at the same location. See
J.A. 5-6. Sam Geller, Gulf Coast's President/Director,
passed away on August 2, 2013. J.A. 7 ¶ 23; 10 ¶
42. In Gulf Coast's district court complaint, it
described Mr. Geller as "a principal stockholder of Gulf
Coast who, as an owner, director, and officer, exercised
actual and legal control over the operations of the
corporation." J.A. 13 ¶ 53. At the time of his
death, Mr. Geller owned forty-five percent of Gulf Coast
shares. J.A. 32. Approximately one month after Mr. Geller
died, "Barbara Druss Geller was appointed Independent
Executrix" of Mr. Geller's estate. J.A. 13 ¶
54. Ms. Geller, who also owned forty-five percent of Gulf
Coast's shares before Mr. Geller's passing, reached a
partition agreement with Mr. Geller's estate. Under the
agreement, Ms. Geller "obtained the ownership of 100
percent of Gulf Coast stock which" had previously been
shared between her and Mr. Geller during his life. J.A. 13
¶ 55. Despite Ms. Geller now possessing ninety percent
of Gulf Coast's shares and being the majority
stakeholder, Gulf Coast continued to operate as if Mr. Geller
was in charge. When TTB investigated whether an ownership
change occurred after Mr. Geller's death, it found Gulf
Coast's general manager still using Mr. Geller's
signature stamp when filing TTB reports. J.A. 113 ¶ 8.
informed Gulf Coast via letter that the Company's failure
to report the change in stock ownership automatically
terminated its alcohol and tobacco permits. J.A. 72-73. The
letter also noted Gulf Coast's continued operation
without active permits would result in tax liability, along
with civil and criminal penalties. Id. TTB sent Gulf
Coast a second letter over a month later, stating the Company
owed $7, 836, 787.40 in taxes, penalties, and interest for
operating without a valid tobacco permit. J.A. 75-76. The
agency has yet to initiate tax collection proceedings against