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Seventh Circuit Reverses Course on Allowing Circumvention of Appeal Deadline

(Parker Tax Publishing November 2019)

In light of recent Supreme Court decisions emphasizing that federal courts have no authority to read equitable exceptions into fixed filing deadlines, the Seventh Circuit concluded that it was wrong when it previously held that district courts could extend the 10-day window to petition an appellate court to hear an interlocutory appeal if there were equitable reasons. Creating a split in the circuits, the Seventh Circuit held that the rule in 28 U.S.C. Sec. 1292(b), which allows a district court to certify an order for interlocutory review but requires the party to seek permission from the appeals court within ten days of the district court's certification, does not permit the district court to extend the 10-day window by re-entering or recertifying its order. Groves v. U.S., 2019 PTC 423 (7th Cir. 2019).

Philip Groves is an accountant who allegedly organized, sold, and promoted abusive tax shelters related to distressed Chinese debts in 2005. Ten years later, the IRS assessed a tax penalty against him. Groves sued the government, arguing that the five-year statute of limitations for civil penalties in 28 U.S.C. Sec. 2462 applied to the assessment against him - and thus that the IRS acted too late. A district court concluded that Sec. 2462 didn't apply, so in May 2017 it granted the government's motion to strike Groves' statute-of-limitations defense, and in July it denied Groves' motion for judgment on the pleadings for the same reasons. But because it believed that the orders satisfied the standard for immediate appeal provided in 28 U.S.C. Sec. 1292(b), the court certified the orders for interlocutory review on August 8.

Groves had the district court's permission to appeal, but Sec. 1292(b) also required him to seek permission from the Seventh Circuit within 10 days of the district court's certification. He attempted to obtain the Seventh Circuit's permission on August 18, the 10th day after the district court's certification order, by emailing an application to appeal. But a paralegal mistyped the email address, so the email was not delivered. The paralegal discovered the error on Sunday, August 20th, and emailed the application to the correct address that day. On August 21, Groves informed the district court of the mix-up and asked it to recertify its orders to restart the 10-day clock. The court complied, entering an otherwise identical second order certifying its May and July orders for interlocutory appeal. Groves refiled his application the next day, and the Seventh Circuit provisionally granted it.

In general, appellate review must await a final judgment. However, under 28 U.S.C. Sec. 1292(b), when a district court determines that one of its orders involves a controlling question of law as to which there is substantial difference of opinion and an immediate appeal from the order may materially advance the ultimate termination of the litigation, it can say so in the order, enabling the disappointed litigant to ask the court of appeals for immediate review of the order. The court of appeals has discretion to permit the appeal if the application is made within 10 days after the entry of the order. A district court can include the certification in the original order or add it afterward by amendment; in the latter circumstance, the time to petition runs from entry of the amended order. In other words, the clock does not start until the litigant is actually authorized to file a petition. In Nuclear Engineering Co. v. Scott, 660 F.2d 241 (7th Cir. 1981), the Seventh Circuit held that the 10-day deadline in Sec. 1292(b) is jurisdictional and that, even after the statutory 10-day deadline has passed, a district court is permitted to give litigants more time to file for an interlocutory appeal if there are equitable reasons to allow it.

Both parties argued that the Seventh Circuit had jurisdiction to hear the appeal even though Groves missed the initial deadline. The government, consistent with Nuclear Engineering, asserted that Sec. 1292(b)'s deadline is jurisdictional but that the statute allows a district court to recertify an order in order to reset the clock. Groves likewise argued that the Seventh Circuit should to adhere to Nuclear Engineering, but also advanced an alternative argument: he maintained that Sec. 1292(b)'s 10-day deadline is not jurisdictional, but rather a claim-processing rule that the government had waived in this case. Groves argued that no statutory deadline is jurisdictional unless Congress clearly says so, and he maintained that Congress did nothing special to suffuse the 10-day deadline to petition for permission to file an interlocutory appeal with jurisdictional significance.

The Seventh Circuit disagreed and held that, because Groves failed to file his petition for permission to appeal within 10 days of the district court's initial certification order, it lacked jurisdiction to consider it and dismissed Groves' appeal. In so holding, the Seventh Circuit cited the fact that Supreme Court intervening precedent, not to mention the Seventh Circuit's own intervening precedent, had rendered Nuclear Engineering Co. an aberration.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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