Jurisdiction in the Court of Federal Claims and FBAR Cases

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Yesterday, in Paying the Full FBAR Penalty, Keith discussed the Court of Claims opinion in Norman v US, which upheld an FBAR penalty and disagreed with district court opinions in Colliot and Wadhan concerning the intersection of the FBAR regs and the statute.  Keith’s post flags an important split in views concerning the intersection of regs, which cap the penalty at $100,000, and the later-enacted statute, which provides that the maximum penalty “shall be increased” to the greater of $100,000 or 50% of the account.

Keith notes that the case was tried in the Court of Federal Claims; most of the cases concerning FBAR penalties have arisen in federal district courts. There is a side jurisdictional issue in the case, and one of the reasons for the delay between the complaint being filed and the outcome Keith discussed is that the government initially argued in Norman that only federal district courts could hear FBAR cases.

Here is the statutory context of the dispute.

Title 28 Section 1355 states that “district courts shall have original jurisdiction, exclusive of the courts of the States, of any action or proceeding for the recovery or enforcement of any fine, penalty, or forfeiture, pecuniary or otherwise, incurred under any Act of Congress, except matters within the jurisdiction of the Court of International Trade under section 1582 of this title.”

The Tucker Act is also found within Title 28 and waives the federal government’s sovereign immunity from suit and authorizes monetary claims “founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.”  The Court of Federal Claims has trial court jurisdiction over “Big” Tucker Act claims against the United States; district court and the Court of Federal Claims have concurrent jurisdiction over claims for $10,000 (so-called Little Tucker Act claims)

In 2016, the government argued in effect that the Tucker Act was preempted by Section 1355 and sought to dismiss Norman’s complaint; the Court of Federal Claims disagreed, finding that 1355 was not meant to give district courts jurisdiction in all penalty cases and also finding that the FBAR penalties in Title 31 did not reflect a “specific and comprehensive scheme for administrative and judicial review” which could also displace its jurisdiction under the Tucker Act.

The 2016 Norman opinion discusses a handful of cases applying 1355 that limit the Court of Federal Claims’ jurisdiction; ultimately it distinguished those cases from Norman as relating to either forfeiture cases or criminal cases.  There is a bit more to the issue, including a 9thCircuit case that suggests that 1355 is only meant to apply when the government is reducing a penalty to judgment. The 2016 Norman opinion did note that there was tension between Section 1355 and the Tucker Act, and substantial ground for difference of opinion in its view that the CFC had jurisdiction, leading it to conclude that the government could file an interlocutory appeal on the jurisdictional issue, which would have allowed for an appellate opinion on that issue before a trial on the merits.

That appeal never came, as the government abandoned its jurisdictional defense. While the government lost the battle in 2016, as Keith discussed, it won the war of the case—at least for now. One expects that Mrs. Norman may try her luck for an appellate review on the merits of the penalty, and see if the panel agrees with the two district court judges that have capped the penalty in line with the regulations. In addition, if Norman appeals one suspects that the circuit court may take a fresh look at the jurisdictional issue.

 

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. Norman Diamond says:

    This seems to explain the REASON why the US hasn’t pursued FBAR cases against US non-resident citizens. It also appears to suggest that if the US begins to allege FBAR fines against a non-resident citizen and revokes a passport, Tax Court will be the only one with jurisdiction, forcing Tax Court decide an FBAR case.

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