Two Recent Circuit Level Decisions Appear to Dispute View That the Refund Claim Filing Requirement is Jurisdictional (Part 1)

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At the end of 2021 and beginning of 2022, a pair of cases came out which may create a turning point in the view of courts regarding a court’s jurisdiction in refund suits where a possible defect in or the absence of an administrative claim exists.  In the Third Circuit the case of Morton v. United States Virgin Islands, No. 21-1292 (3rd Cir. 2021) held that the district court erred in applying a failure-to-state-a-claim analysis to the issue of Mr. Morton’s Article III standing to bring the claim.  In Brown v. United States, No. 2021-1721 (Fed. Cir. 2022), the court held that the dismissal of the Browns’ refund suit for lack of jurisdiction was incorrect but sustained the decision below because the Browns failed to prove that their claim for refund was duly filed.

The Morton opinion is not precedential but the Brown opinion is.  This post will focus on Morton and is the shorter of the two posts.  The Brown case sets the scene for an even more recent Court of Federal Claims case which will be discussed in a forthcoming post.


The Morton case is a class action prisoner case in which Joe DiRuzzo and Daniel Lader, representing the prisoners pro se, sought to bring to prisoners in the Virgin Islands the same relief that prisoners in the United States received as a result of Scholl v. Mnuchin, Dk. No. 20-cv-05309-PJH (N.D. Cal. 2020) blogged here, here, here, and here.  The final link discusses both the Scholl case which was coming to an end and the Morton case which was beginning at the time of that post.  It contains links to the pleadings in Morton.  The Scholl and Morton cases seek to set aside the administrative denial of the stimulus payments to prisoners.  Even though at the time of deciding the case the district court had the benefit of the Scholl decision, the district court in Morton dismissed the claim for lack of jurisdiction because Mr. Morton had not filed a return which it read as a prerequisite to relief.

The Third Circuit disagreed, stating that standing requires that he establish three things:

Morton must have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Thorne v. Pep Boys Manny Moe & Jack Inc., 980 F.3d 879, 885 (3d Cir. 2020) (quoting Spokeo v. Robins, 578 U.S. 330, 338 (2016)). Morton has met all three elements for each of his three claims.

He could show that the Virgin Islands would have denied his claim for the stimulus payment had he filed a return.  He could show that his injury is directly traceable to the refusal to issue stimulus payments to incarcerated individuals, and he could show that the harm could be remedied by the equitable and monetary relief he proposed.  Based on these conclusions which directly tied to the requirement for standing, the Third Circuit determined that the district court erred in dismissing the case on this ground. 

After holding that Morton had Article III standing to bring the suit, the court indicated that the IRC 7422(a) requirement to file a predicate administrative refund claim is not jurisdictional, writing:

The Virgin Islands’ arguments to the contrary — that Morton did not file a tax return before suing and does not belong to a protected class — bear on the merits of Morton’s claims rather than whether he had standing to bring them. They are arguments for a motion to dismiss for failure to state a claim, not a motion to dismiss for lack of subject matter jurisdiction. Bell v. Hood, 327 U.S. 678, 682 (1946); Mielo, 897 F.3d at 479 (“our standing inquiry must avoid any consideration of the merits beyond a screening for mere frivolity.”). For that reason, the District Court erred by crediting these arguments in concluding that Morton lacked Article III standing.

Oddly, however, the Third Circuit did not cite the recent Supreme Court case law holding that most claim-processing rules for court suits (including administrative exhaustion requirements) are no longer jurisdictional.  The Third Circuit merely remanded the case to the district court for further proceedings on the merits.

In part two of this post, I will take up the decision in Brown.


  1. As a side note, the circuit courts that are beginning to recognize that, under recent Supreme Court case law on what is jurisdictional, the section 7422(a) administration exhaustion requirement (i.e., filing an administrative claim) is not jurisdictional to a refund suit are merely coming to the same conclusion as other circuit courts in recent opinions under section 7433 (suits for damages for wrongful collection actions). Section 7433 also contains an administrative exhaustion requirement and a 2-year deadline to bring suit. In Hoogerhide v. IRS, 637 F.3d 634 (6th Cir. 2011), the 6th Cir. affirmed a holding that the failure to administratively exhaust precluded relief under section 7433, but that, under current Supreme Court case law, the exhaustion requirement is not, as the district court thought, jurisdictional, but a mere mandatory claim-processing rule. Similarly, in Keohane v. United States, 669 F.3d 325 (D.C. Cir. 2012), the D.C. Cir. affirmed a holding that filing a section 7433 suit beyond 2 year statute of limitations under section 7433(d) precluded relief, but under current Supreme Court case law, compliance with that statute of limitations is not, as the district court though, jurisdictional, but a mere mandatory claim-processing rule.

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