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Gulf Coast Maritime Supply, Inc. v. United States

United States Court of Appeals, District of Columbia Circuit

August 11, 2017

Gulf Coast Maritime Supply, Inc., Appellant
United States of America, et al., Appellees

          Argued May 10, 2017

         Appeal from the United States District Court for the District of Columbia No. 1:16-cv-01461

          John 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.


          PER CURIAM.

         This 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.

         Gulf 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 (tobacco permit).

         Gulf 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.

         We 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.



         The Tobacco and Alcohol Permitting Schemes

         Export 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).

         A 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).

         As to 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.

         Under 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.

         In the 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 regulations.").

         The 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.


         Gulf Coast's Ownership Change

         Gulf 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.

         TTB 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 ...

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