author: MERRITT, Circuit Judge.

text:
    John R. TURNER, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
    No. 15-6060
    United States Court of Appeals, Sixth Circuit.
    Argued: October 20, 2016
    Decided and Filed: February 15, 2017
    ARGUED: Robert L. Hutton, GLANK-LER BROWN, PLLC, Memphis, Tennessee, for Appellant. Murrell G. Martindale, UNITED STATES ATTORNEY’S OFFICE, Memphis, Tennessee, for Appellee. ON BRIEF: Robert L. Hutton, GLANK-LER BROWN, PLLC, Memphis, Tennessee, for Appellant. Murrell G. Martindale, UNITED STATES ATTORNEY’S OFFICE, Memphis, Tennessee^ for Appellee.

      Before: MERRITT, BATCHELDER, and ROGERS, Circuit Judges.
   OPINION

MERRITT, Circuit Judge.

This case arises because our system of federalism allows dual prosecutions by both state and federal sovereigns for one criminal episode without the protection of double jeopardy. Abbate v. United States, 359 U.S. 187, 79 S.Ct. 666, 3 L.Ed.2d 729 (1959). This appeal presents the question of whether the Sixth Amendment right to counsel may attach before formal charges are filed in federal court. Defendant John Turner was arrested in Memphis by officers working with a joint federal-state an-ticrime task force. He was charged with aggravated robbery pursuant to Tennessee law, and retained counsel to represent him. During the pendency of the state proceedings, the United States Attorney’s Office and Turner’s attorney in the state proceeding discussed settlement regarding forthcoming federal charges arising out of the same conduct that led to the state charges. Turner rejected a federal plea offer regarding the as-yet uncharged federal case, but he subsequently pled guilty to the federal charges pursuant to a less-favorable plea agreement. He filed a motion pursuant to 28 U.S.C. § 2255 to vacate or set aside his federal conviction based on ineffective assistance of counsel during plea negotiations concerning the federal charges. The government argued that because Turner had no Sixth Amendment right to counsel regarding plea negotiations conducted prior to the filing of formal charges against him, counsel could not be constitutionally ineffective. Following Sixth Circuit precedent holding that the Sixth Amendment right to counsel does not attach before formal charges are filed, the district court denied the motion without reaching the merits of the ineffective assistance of counsel claim. Because our precedent requires us to do so, we affirm the judgment of the district court.

I.

The relevant facts are undisputed. Turner robbed four Memphis-area businesses at gunpoint on October 3, 2007. He was arrested by a Memphis police officer working as part of the “Safe Streets Task Force,” a joint federal-state task force created to target and prosecute individuals involved in serious crimes. The complaint was presented to a Shelby County General Sessions judge who signed the arrest warrant. Turner was arrested by state officers, some of whom were assigned to the task force.

Turner retained attorney Mark McDaniel. Several months later, in February 2008, a grand jury in Shelby County returned three indictments charging Turner with aggravated robbery under Tennessee law. The fourth indictment, also for aggravated robbery, was returned in June 2008. Turner was then offered a plea deal on the state charges that would result in a negotiated sentence of eight or nine years. The state charges were resolved through the plea agreement in March 2009 and are not at issue in this appeal.

Although an exact date is not given by the parties, at some point during the summer of 2008 while McDaniel represented Turner on the state charges, the state district attorney told McDaniel that the United States Attorney’s Office planned to bring federal charges against Turner and told McDaniel to call Assistant United States Attorney Tony Arvin. Arvin told McDaniel that the United States planned to bring federal charges against Turner under the Hobbs Act, 18 U.S.C. § 1951, which criminalizes interference with commerce by threats or violence, and for using a firearm during a crime of violence in violation of 18 U.S.C. § 924(c) for each of the four robberies. On the federal firearm charges alone Turner faced a mandatory minimum of 82 years. Assistant United States Attorney Arvin told McDaniel that he would offer Turner a sentence of 15 years on the federal charges on the condition that Turner accept the offer before the federal indictment was returned.

McDaniel contends that he relayed the federal plea deal correctly and timely to Turner, but Turner did not want to take it. McDaniel claims he spoke to Turner numerous times over the summer of 2008, and Turner told him he understood the federal charges against him and understood that they were separate from the state charges. McDaniel says he met with Turner on July 28, 2008, to reiterate to Turner that the United States Attorney was waiting for an answer and that the plea offer of 15 years would expire shortly after September 15, 2008, when the charges would be presented to a federal grand jury. McDaniel says that Turner told him that 15 years was too much time for what he did. Turner disputes McDaniel’s version of the events, but he does not dispute that he did not accept the plea offer before the federal indictment was returned. Turner then discharged McDaniel and hired a new attorney. A new Assistant United States Attorney took over Turner’s case and the best deal that Turner’s new attorney could negotiate was a 25-year sentence. Turner accepted the plea deal with a sentence of 25 years, pleading guilty to four counts of robbery affecting commerce in violation of 18 U.S.C. § 1951, and one count of using and carrying a firearm during and in relation to a crime of violence in violation of 18 U.S.C. § 924(c). He was sentenced to 25 years. He waived his right to direct appeal on the federal charges pursuant to the terms of the plea agreement.

In 2012, Turner filed a Motion to Vacate, Set Aside, or Correct Sentence by a Person in Federal Custody pursuant to 28 U.S.C. § 2255. The sole issue presented was whether defense counsel McDaniel rendered ineffective assistance of counsel during the plea negotiations on the federal charges. The district court denied the motion without holding an evidentiary hearing because it did not reach the factual question of whether McDaniel was ineffective. Instead, it decided the issue on the purely legal question of whether Turner’s Sixth Amendment right to counsel on the federal charges had attached at all when Turner rejected the government’s plea offer and found that it had not.

II.

On appeal, Turner raises two issues: (1) whether his Sixth Amendment right to counsel attached during plea negotiations that occurred prior to his federal indictment, and (2) whether the district court should have granted an evidentiary hearing to develop this claim.

The Sixth Amendment provides that “[i]n all criminal prosecutions, the accused shall enjoy the right ... to have the Assistance of Counsel for his defense.” U.S. Const, amend. VI. Whether the Sixth Amendment right to counsel attaches during preindictment plea negotiations is a question of law we review de novo. United States v. Moody, 206 F.3d 609, 612 (6th Cir. 2000).

A. Supreme Court Precedent

The Sixth Amendment guarantees a right to counsel at critical stages of a criminal proceeding. Montejo v. Louisiana, 556 U.S. 778, 786, 129 S.Ct. 2079, 173 L.Ed.2d 955 (2009). Some pretrial proceedings qualify as critical stages, but only if formal charges have been filed. See Missouri v. Frye, 566 U.S. 133, 132 S.Ct. 1399, 182 L.Ed.2d 379, (2012) (postindictment plea negotiations); United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 1149 (1967) (postindictment lineups); Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246 (1964) (postin-dictment interrogations). The Supreme Court has not squarely addressed whether a defendant has the right to counsel during preindictment plea negotiations, but it has consistently drawn the line at the time of filing of formal charges, holding that the right to counsel attaches only after the formal initiation of judicial proceedings, relying on a purely chronological, bright-line test. See Moran v. Burbine, 475 U.S. 412, 106 S.Ct. 1135, 89 L.Ed.2d 410 (1986) (rejecting claims that Sixth Amendment right to counsel should attach when confessions during police interrogation about crimes not yet charged may well seal suspect’s fate); United States v. Gouveia, 467 U.S. 180, 192-93, 104 S.Ct. 2292, 81 L.Ed.2d 146 (1984) (no right to counsel during preindictment administrative detention of inmates); Kirby v. Illinois, 406 U.S. 682, 689-90, 92 S.Ct. 1877, 32 L.Ed.2d 411 (1972) (plurality opinion) (refusing to extend the right to counsel during preindictment police lineup).

Despite the Court’s recognition that certain proceedings “might well settle the accused’s fate and reduce the trial itself to a mere formality,” Wade, 388 U.S. at 224, 87 S.Ct. 1926, the bright-line test persists. In addition, the Court has repeatedly recognized that the transition from investigation by law enforcement to accusations by a prosecutor is a critical juncture. See Gouveia, 467 U.S. at 188-89, 104 S.Ct. 2292 (recognizing the importance of counsel at “critical” proceedings, including “when the accused is confronted with both the intricacies of the law and the advocacy of the public prosecutor”); Wade, 388 U.S. at 227-28, 87 S.Ct. 1926 (counsel attaches at “critical” stages of the criminal process). Recognizing that plea bargains have “become so central to the administration of [the] criminal justice system,” the Court held in two companion cases that a defendant is entitled to the effective assistance of counsel during plea negotiations. Missouri v. Frye, 132 S.Ct. at 1407 (defense counsel has a duty to communicate formal offers from the prosecution); see also Lafler v. Cooper, 566 U.S. 156, 132 S.Ct. 1376, 182 L.Ed.2d 398 (2012) (defendant was entitled to relief when he rejected a plea offer based on counsel’s incorrect advice concerning the federal sentencing guidelines). While Frye and Lafler recognize that plea negotiations are central to the American system of criminal justice, the plea negotiations in question occurred after indictments had been filed and the Court did not consider the question of whether the right to counsel attached in preindictment plea negotiations.

B. Sixth Circuit Precedent

Unlike the Supreme Court, our court has addressed the precise question of whether the right to counsel attaches in plea negotiations occurring before the filing of formal charges, and it has adhered to the bright-line rule that the right attaches only after formal charges have been filed. In United States v. Moody, 206 F.3d 609 (6th Cir. 2000), defendant Moody was part of a conspiracy to distribute cocaine in Florida and Tennessee. The FBI conducted six interviews with Moody while he was unrepresented by counsel during which he made several incriminating statements. A federal prosecutor was present for two of the interviews. The government offered him a plea deal limiting his sentence to no more than five years if he would plead guilty and continue to cooperate with the government. Moody then retained counsel who contacted the government and rejected the plea offer without asking about the substance of the interviews and having no knowledge of the self-incriminating statements Moody had made during the interviews. Moody was then indicted on charges that exposed him to far more than five years in jail. The same attorney then advised him to plead guilty due to the incriminating statements Moody had made. Moody pled guilty and received a ten-year sentence, double .the original maximum sentence offered. Moody then filed-a motion to vacate his sentence based on-ineffective assistance of counsel arising from the advice to reject the original plea offer with the five-year maximum sentence. The district court granted the motion and resentenced Moody to five years.

Our court reversed the district court and found that, although plea negotiations were a critical stage of the proceedings, precedent required it to hold that the right to counsel had not attached. The Moody court reversed with regret, calling the bright-line test it was required to follow a “triumph of the letter over the spirit of the law.” 206 F.3d at 616. The Moody opinion acknowledged that the prosecutor’s prein-dictment plea negotiations “raise[d] the specter of the unwary defendant agreeing to surrender his right to a trial in exchange for an unfair sentence without the assurance of legal assistance to protect him.” Id. at 615. The opinion also acknowledged that by offering a plea deal, the prosecutor had committed himself to prosecute Moody. Id.

Our court reaffirmed its reliance on the bright-line test' recently in Kennedy v. United States, 756 F.3d 492 (6th Cir. 2014). In that case, the defendant argued that the Supreme Court’s recent decisions in Missowri v. Frye and Lafler v. Cooper, which held that a defendant has a right to the effective assistance of counsel during plea negotiations, reopened the question of when the right to counsel attaches if plea negotiations occur. Following Moody, we applied the bright-line test, rejecting Kennedy’s argument that Lafler and Frye indicated that the Court was backing away from the bright-line test regarding when the right to counsel attaches. But, as noted above, the Lafler and Frye plea negotiations occurred after formal charges had been filed and the Court did not discuss the issue of when, chronologically, the right to counsel attached, so we did not find any change in the law with regard to the right to counsel in preindictment plea negotiations based on their holdings. Kennedy, 756 F.3d at 493-94.

Our sister circuit courts are split as to whether the Sixth Amendment right to counsel attaches in preindictment plea negotiations. At least five other circuit courts follow the bright-line test with respect to the right to counsel before formal charges are filed, and four courts allow a rebutta-ble presumption to the argument that the right to counsel attaches only after formal charges are filed. For a discussion of cases from these circuits, as well as a discussion of the changes to modern criminal proceedings that favor a change in the rule, see Steven J. Mulroy, “The Bright Line’s Dark Zone: Pre-Charge Attachment of the 6th Amendment Right to Counsel,” 92 Wash. L. Rev. - (2017) (forthcoming) (available electronically at http://dx.doi.org/ 10.2139/ssrn.2821179 or on the Sixth Circuit Public Docket Sheet, Turner v. United States, No. 15-6060 (6th Cir. Sept. 6, 2016), ECF No. 28); see also Brandon K. Bres-low, Signs of Life in the Supreme Court’s Uncharted Territory: Why the Right to Effective Assistance of Counsel Should Attach to Pre-Indictment Plea Bargaining, 61-NOV Fed. Law. 34 (Oct./Nov. 2015).

III.

In this case, Turner was already represented by counsel on state charges that had been previously filed. The federal prosecutor told Turner’s attorney that federal charges arising out of the same incidents would be forthcoming — there was no doubt that the process had turned adversarial between the United States and Turner. Indeed, the federal prosecutor asked the state district attorney to have McDaniel, Turner’s lawyer in the state proceedings, contact the United States Attorney’s office to discuss a plea agreement concerning forthcoming federal charges, so the United States Attorney’s office considered Turner to be represented by counsel. An offer concerning the federal charges was extended to McDaniel to pass on to Turner. The offer was contingent on Turner accepting it before the indictment was returned. Under these plea agreement terms, Turner could never challenge his attorney’s effectiveness because the negotiations had to take place prior to the filing of formal charges or the offer would be withdrawn.

Turner argues that United States v. Morris, 470 F.3d 596 (6th Cir. 2006), implicitly made an exception to the bright-line rule in Moody in circumstances similar to the ones in this case. Defendant Morris was investigated and arrested by a state-federal joint task force in Michigan on firearm and drug-related charges. He was initially charged in Michigan state court and an attorney was appointed to represent him on those charges. The attorney advised Morris on the consequences of the state plea offer and possible forthcoming federal charges, but she erroneously advised him on the federal sentencing guideline range for the federal crimes. Unlike this case, the state plea deal included dropping the federal charges if Morris accepted the offer, so the choice was between federal and state prosecution. Morris rejected the state plea offer because his attorney incorrectly advised him that the potential sentencing range for the federal charges might be lower. He decided to be prosecuted in federal court and received a federal sentence that was double what he would have received in state court. After being indicted in federal court, Morris sought to dismiss the federal indictment and to be sentenced in the state court based on the attorney’s incorrect advice on the federal sentencing range. The relief was granted and this court affirmed, all without mentioning Moody.

This case differs from Morris because the state and federal governments pursued separate prosecutions against Turner that, although arising out of the same conduct, were independent of each other. This was not an either-or choice for Turner as it was for defendant Morris. Turner had an attorney for the state prosecution who was advising him on those charges. The attorney’s advice in the state-court proceeding is not at issue here. But Turner argues, with some force, that the circumstances in Morris point to an implied exception to the bright-line rule that formal charges must be filed before the right to counsel attaches, at least where federal and state prosecutions are related. Morris found it unfair that a defendant would be offered a plea agreement by the government and simultaneously deny him the right to effective counsel in order to properly evaluate that plea agreement. Morris, 470 F.3d at 600. That same idea applies here: the federal government made Turner a plea offer through his acknowledged attorney, but now argues that because he did not yet have the Sixth Amendment right to counsel regarding those as-yet-unfiled federal charges, any ineffectiveness on the part of counsel is of no matter.

In adversarial plea negotiations like Turner’s, a defendant’s right to trial and to contest the sentence are often at stake. It makes plea negotiations a “critical stage” of the criminal process. Whether they occur before or after the filing of formal charges, it is undisputed that the plea negotiation process is adversarial by nature and the average defendant is ill equipped to navigate the process on his own. The current bright-line rule does not allow for the realities of present-day criminal prosecutions and their heavy reliance on plea bargaining. Defendants face an increasing number of federal-state prosecutions that blur the lines of demarcation on exactly when charges are filed for purposes of the Sixth Amendment right to counsel. Defendants also must navigate the complex web of federal sentencing guidelines, computations that confound even those who work with them often.

As we did in Moody sixteen years ago, we restate here the well-reasoned words of Judge Wiseman, sitting by designation, when he observed in dissent thirty-five years ago:

The Court has extended the right in new contexts that present the same dangers that gave rise to the right originally, those dangers being confrontation with the procedural system, the expert prosecutor, or both. In the plea bargaining context, the accused is presented with both of these dangers, and therefore those persons who enter the plea bargaining process before formal charges have been filed should have the protection of the Sixth Amendment.... [W]hen the government begins plea negotiations with a citizen who has not been formally charged, he is just as surely faced with the “prosecutorial forces of organized society” as the defendant who has been formally introduced into the system.

Moody, 206 F.3d at 614-15 (quoting United States v. Sikora, 635 F.2d 1175, 1182 (6th Cir. 1980) (Wiseman, J., dissenting)). Notwithstanding this thoughtful reasoning, we must follow the precedent of Moody and Kennedy. This panel should not overrule the decision of another panel; the earlier determination is binding authority unless a decision of the Supreme Court mandates modification or this Court sitting en banc overrules the prior decision. Whether Turner in fact received ineffective assistance of counsel during the prein-dictment plea negotiations in the federal case against him we do not know, and we cannot reach the question today based on our prior rulings. We therefore must affirm the district court’s judgment that Turner’s right to counsel had not attached.

IV.

Because we adhere to our precedent and find that no right to counsel attaches before the filing of formal charges and because it is undisputed that no formal charges had been filed against Turner when the plea negotiations occurred, an evidentiary hearing would be of no value. We therefore find no error in the district court’s decision to deny the motion for an evidentiary hearing.

For the foregoing reasons, the judgment of the district court is affirmed.

      . The task force is the result of a Memorandum of Understanding between the FBI, the Collierville, Tennessee, police department, the Memphis police department and the Shelby County, Tennessee, Sheriff’s Office. Officers from each of the four law enforcement agencies staff the task force. The Memorandum of Understanding provides that “the criteria for determining whether to prosecute a particular violation in state or federal court will focus upon achieving the greatest overall benefit to law enforcement and the jurisdiction will be resolved through discussion among all investigative agencies and prosecutive [sic] entities having an interest in the matter.” Memorandum of Understanding at ¶ IV.D.

      . The district court granted the government’s motion to release McDaniel from the attorney-client privilege only to the extent necessary to respond to Turner’s § 2255 motion.


source: Caselaw Access Project

author: ALICE M. BATCHELDER, Circuit Judge. MERRITT, Circuit Judge,

license: Public Domain

text:
    Lee E. MOORE, Petitioner-Appellant, v. Betty MITCHELL, Warden, Respondent-Appellee.
    No. 15-3374
    United States Court of Appeals, Sixth Circuit.
    Argued: April 27, 2016
    Decided and Filed: February 15, 2017
    ARGUED: Laurence E. Komp, Manchester, Missouri, for Appellant. Charles L. Wille, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellee. ON BRIEF: Laurence E. Komp, Manchester, Missouri, Michael J. O’Hara, O’HARA, RUBERG, TAYLOR, SLOAN & SERGENT, for Appellant. Charles L. Will'e, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellee.
    Before: MERRIT, BATCHELDER, and GIBBONS, Circuit Judges.
   BATCHELDER, J., delivered the opinion of the court in which GIBBONS, J., joined. MERRITT, J. (pp. 778-79), delivered a separate dissenting opinion.

OPINION

ALICE M. BATCHELDER, Circuit Judge.

Lee Moore, convicted of kidnapping, robbing, and murdering Melvin Olinger, appeals the district court judgment that denied his motion for relief from judgment filed pursuant to Federal Rule of Civil Procedure 60(b). He argues that the Supreme Court’s decision in Trevino v. Thaler, — U.S. -, 133 S.Ct. 1911, 185 L.Ed.2d 1044 (2013), and new evidence amount to extraordinary circumstances that justify relief under Rule 60(b)(6). But Trevino does not apply here. Trevino expanded the application of Martinez v. Ryan, 566 U.S. 1, 132 S.Ct. 1309, 182 L.Ed.2d 272 (2012), only to cases in which a claim of ineffective assistance of trial counsel could not have been made meaningfully on direct appeal. But Moore brought a claim of ineffective assistance of trial counsel on direct appeal, and the Ohio Supreme Court adjudicated that claim on the merits. We therefore AFFIRM the decision of the district court.

I.

Moore was tried and convicted in 1994. The Ohio Court of Appeals affirmed his conviction and sentences in June 1996, and the Ohio Supreme Court affirmed in February 1998. State v. Moore, 81 Ohio St.3d 22, 689 N.E.2d 1 (1998). While his first appeal was pending, Moore filed a petition for post-conviction relief in the trial court. The trial court denied the petition, and the Ohio Court of Appeals affirmed that decision. State v. Moore, No. C-970353, 1998 WL 638353 (Ohio Ct. App. Sept. 18, 1998). The Ohio Supreme Court denied review in 1999. Moore applied to reopen his appeal under Ohio R. App. P. 26(B) in September 2000, claiming that his counsel in his first appeal had been ineffective. The Ohio Court of Appeals denied the application as untimely and on the basis of res judicata. The Ohio Supreme Court affirmed that decision, holding that Moore failed to raise a genuine issue as to whether he was deprived of the effective assistance of counsel on appeal. State v. Moore, 93 Ohio St.3d 649, 758 N.E.2d 1130, 1133 (2001).

Moore filed a petition for a writ of habe-as corpus in 2000, raising twenty-five claims. After a period of discovery, the district court expanded the record to include evidence developed in that discovery, and granted relief on Claim (2)(B) — that Moore had received ineffective assistance of counsel at sentencing — and on two claims alleging improper jury instructions in the penalty phase of his trial. We affirmed the district court’s judgment in part and vacated and remanded it in part, holding that Cullen v. Pinholster, 563 U.S. 170, 131 S.Ct. 1388, 179 L.Ed.2d 557 (2011), precluded the court from considering additional evidence that Moore had introduced in the district court in support of his claim of ineffective assistance of counsel at sentencing. Moore v. Mitchell, 708 F.3d 760, 784 (6th Cir. 2013), cert. denied, — U.S. -, 134 S.Ct. 693, 187 L.Ed.2d 559 (2013). In that opinion, we rejected Moore’s argument that Martinez required us to remand the case to the district court for factual development of his ineffective assistance of trial counsel claim. We held that Martinez applied “[w]here, under state law, claims of ineffective assistance of trial counsel must be raised in an initial-review collateral proceeding,” Martinez, 132 S.Ct. at 1320, and Moore had raised on direct appeal a claim of ineffective assistance of trial counsel. Moore, 708 F.3d at 785.

In January 2014, Moore filed a motion to set aside the judgment pursuant to Federal Rule of Civil Procedure 60(b), and amended the motion in March 2014. He argued that the Supreme Court’s 2013 decision in Trevino permitted him to use newly developed evidence of ineffective assistance of post-conviction counsel to establish cause and prejudice for his failure to present evidence to support his post-conviction claim of ineffective assistance of trial counsel.

The magistrate judge found that this court’s prior decision was the law of the case, that neither Trevino nor McGuire v. Warden, Chillicothe Correctional Institution, 738 F.3d 741 (6th Cir. 2013), cert. denied, — U.S. -, 134 S.Ct. 998, 187 L.Ed.2d 847 (2014), changed that result, and that neither Trevino nor Martinez created an exception to the Pinholster limit on new evidence. The magistrate judge found.also that neither Martinez nor Trevino applied to this case because Moore did not procedurally default his claim of ineffective assistance of trial counsel. The district court adopted the magistrate judge’s findings and conclusions over Moore’s objections but granted a certificate of appealability.

II.

Federal Rule of Civil Procedure 60(b) provides grounds for relief from a final judgment for five particular reasons and “any other reason that justifies relief.” A movant seeking relief under Rule 60(b)(6) must show “extraordinary circumstances” justifying the reopening of a final judgment, and such circumstances “rarely occur” in habeas cases. Gonzalez v. Crosby, 545 U.S. 524, 535, 125 S.Ct. 2641, 162 L.Ed.2d 480 (2005). “[I]t is well established that a change in decisional law is usually not, by itself, an extraordinary circumstance meriting Rule 60(b)(6) relief.” Henness v. Bagley, 766 F.3d 550, 557 (6th Cir. 2014) (internal quotation marks and citation omitted), cert. denied, — U.S. -, 135 S.Ct. 1708, 191 L.Ed.2d 683 (2015). We review for an abuse of discretion the denial of a Rule 60(b) motion. Coyer v. HSBC Mortg. Servs., Inc., 701 F.3d 1104, 1110 (6th Cir. 2012).

“Under the doctrine of law of the case, findings made at one point in the litigation become the law of the case for subsequent stages of that same litigation.” United States v. Moored, 38 F.3d 1419, 1421 (6th Cir. 1994). The law of the case doctrine “is not an inexorable command” but is “directed to a court’s common sense.” Hanover Ins. Co. v. Am. Eng’g Co., 105 F.3d 306, 312 (6th Cir. 1997) (internal quotations and citations omitted). “We previously have stated three reasons to reconsider a ruling: (1) where substantially different evidence is raised on subsequent trial; (2) where a subsequent contrary view of the law is decided by the controlling authority;' or (3) where a decision is clearly erroneous and would work a manifest injustice.” Id.

Moore argues that the district court abused its discretion by relying on the law of the case because Trevino permits him to use newly developed evidence of ineffective assistance of post-conviction counsel to establish cause and prejudice for his failure to present evidence in support of his post-conviction claims of ineffective assistance of trial counsel. Moore contends that Trevino should apply to his case because his claim relies on evidence that is outside the record. He also contends that Ohio’s procedural scheme requires that prisoners bring their claim on collateral review when their claim of ineffective assistance of trial counsel relies on evidence outside the record. See McGuire, 738 F.3d at 752 (“[I]f ineffective assistance cases are divided into two categories, one could argue that the category requiring evidence outside the record must be brought on collateral review in order for review to be meaningful.”).

As we held in our earlier decision in this case, Martinez narrowly answered a precise question — “whether ineffective assistance in an initial-review collateral proceeding on a claim of ineffective assistance at trial may provide cause for a procedural default in a federal habeas proceeding,” 132 S.Ct. at 1315—and does not apply to Moore’s case. Moore, 708 F.3d at 784. Trevino applied Martinez to the procedural framework in Texas because that framework made it very unlikely that a defendant could raise a claim of ineffective assistance of trial counsel on direct appeal. 133 S.Ct. at 1915 (“[T]he Martinez exception applies in [a] procedural regime” in which “[t]he structure and design of [a] system in actual operation ... make it ‘virtually impossible’ for an ineffective assistance claim to be presented on direct review.” (internal citation omitted)).

In this ease, not only does Ohio’s procedural regime make it possible for Moore to present an ineffective assistance claim on direct review, Moore actually brought such a claim on direct review. As the magistrate judge stated correctly in the report and recommendation,

assuming the rule of Martinez and Trevino applies to the Ohio post-conviction system, it only permits excusing a procedural default which barred merit consideration of an ineffective assistance of trial counsel claim. That did not happen here. The Ohio Supreme Court decided Subclaim 2(B) [the ineffective assistance claim] on the merits. Moore, 708 F.3d at 785, citing Moore, [689 N.E.2d at 14]. In other words, there was no procedural default that barred a decision on the merits and thus required excusing under Martinez-Trevino.

Trevino has no effect on our prior holding that “Martinez does not address the type of situation that Moore presents here. Ohio permits ineffective assistance of trial counsel claims to be made on direct appeal, Moore raised this claim on direct appeal, and the Ohio Supreme Court rejected it on the merits. Moore, 689 N.E.2d at 13-14.” Moore, 708 F.3d at 785.

We find no abuse of discretion in the district court’s denial of Moore’s Rule 60(b) motion. This court has not yet determined whether Trevino applies to cases that arise in Ohio. See Landrum v. Anderson, 813 F.3d 330, 336 (6th Cir. 2016); Henness, 766 F.3d at 557. But we have held that neither Martinez nor Trevino, without more, provides the kind of extraordinary circumstances that would justify the'relief sought under Rule 60(b). See Landrum, 813 F.3d at 335-36; Henness, 766 F.3d at 557. In any event, neither case applies because Moore raised his claim of ineffective assistance of trial counsel on direct appeal, and that claim was adjudicated and denied on the merits by the state court. Moore did not default his ineffective assistance of counsel claim on collateral review in the state courts. Our earlier decision holding that Martinez did not apply was not clearly erroneous and would not result in manifest injustice. Trevino supplies no reason to depart from the law of the case, and there is no exception to the law of the case doctrine applicable here. See Hanover Ins. Co., 105 F.3d at 312; Moored, 38 F.3d at 1421. And Pinkol-ster continues to limit our review to the evidence that was before the state court that adjudicated that claim on the merits. See Pinholster, 563 U.S. at 181-82, 131 S.Ct. 1388; Moore, 708 F.3d at 784-85.

III.

For the foregoing reasons, we AFFIRM the decision of the district court.

DISSENT

MERRITT, Circuit Judge,

dissenting.

I disagree with my colleagues that “extraordinary circumstances” do not exist here where defense counsel in closing argument invited the jury to “put” his client “to death.” I do not believe that further development of the record is necessary, but, if so, the recent cases of Trevino v. Thaler, — U.S. -, 133 S.Ct. 1911, 185 L.Ed.2d 1044 (2013), and Martinez v. Ryan, 566 U.S. 1, 132 S.Ct. 1309, 182 L.Ed.2d 272 (2012), should open the door to supplement the record.

At the end of the sentencing phase of this death penalty case, just before the jury retired to consider its verdict, defense counsel stated to the jury on behalf of Moore: “I know I wouldn’t want to go to jail for seventy-three years. I’d rather you put me to death.” Tr. Trans. 1221. This statement to the jury suggesting the execution of his client rather than imprisonment followed closely upon the testimony of the defense expert, a psychologist, Dr. David Chiappone. Defense counsel had just put the expert on the stand without knowing what his testimony would be. The expert testified that Moore told him that he killed the victim intentionally, testimony that directly contradicted the entire theory of Moore’s defense in the case that the shooting was accidental. During the course of the final argument in which defense counsel said, “I’d rather you put me to death,” defense counsel reinforced his request for death by telling the jury that a long sentence in jail was not fair to the victim’s family. Tr. Trans. 1214. In his rambling closing, counsel also said, “I mean if you shoot somebody in the head and you’re in a little area and his brains fly out all over the wall, that is going to have an effect.” Tr. Trans. 1205. By agreeing with the prosecutor about his client’s fate, defense counsel in effect abandoned his client in the sentencing phase of the case during final argument just before the jury began deliberation.

All of these facts were before the Supreme Court of Ohio on direct appeal in which the Supreme Court stated: “In his thirteenth proposition of law, Moore argues that counsel were ineffective at the penalty phase in failing to prepare adequately with witnesses, and that such failure resulted in a surprise revelation fatal to his case.” State v. Moore, 81 Ohio St.3d 22, 689 N.E.2d 1, 14 (1998). The Court’s answer to this ineffective assistance of counsel argument on direct appeal was that “Moore’s arguments under this proposition are purely speculative and do not compel a reversal of his death sentence.” Id. The argument was “speculative” apparently because the state court did not know what effect it had on the jury.

The basic issue of ineffective assistance of counsel was decided on direct appeal by the Ohio Supreme Court with the sentencing phase errors in the transcript before it. The Court decided the question on the merits. It did not invoke procedural default, and there is no reason to invoke AEDPA or its procedural doctrines to block a federal court from reaching the merits. Defense counsel’s invitation to the jury to impose the death penalty against Moore should be regarded under Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984), as a per se violation of the Sixth Amendment right to counsel, a violation in which prejudice is presumed. The Strickland case says:

In certain Sixth Amendment contexts, prejudice is presumed. Actual or constructive denial of the assistance of counsel altogether is legally presumed to result in prejudice. So are various kinds of state interference with counsel’s assistance. Prejudice in these circumstances is so likely that case-by-case inquiry into prejudice is not worth the cost.

Id. at 692, 104 S.Ct. 2052 (citation omitted). When defense counsel effectively abandons his client during the mitigation phase of a death penalty case and calls on the jury to impose death rather than imprisonment, prejudice should be presumed.

This view is reinforced by Herring v. New York, 422 U.S. 853, 95 S.Ct. 2550, 45 L.Ed.2d 593 (1975). There, the Supreme Court recognized the singular significance of counsel’s closing argument in the adversary process. Closing argument is the moment that is supposed to tie all of the evidence together, illuminate the significance of the evidence to the fact-finder, and argue why the evidence supports his client’s position. For a defendant in a capital trial, it is “the last clear chance to persuade the trier of fact” that he should not be executed. Id. at 862, 95 S.Ct. 2550. “ ‘The Constitutional right of a defendant to be heard through counsel necessarily includes his right to have his counsel make a proper argument on the evidence and the applicable law in his favor, however simple, clear, unimpeached, and conclusive the evidence may seem.’ ” Id. at 860, 95 S.Ct. 2550 (quoting Yopps v. Maryland, 228 Md. 204, 178 A.2d 879, 881 (1962)). The Court in Herring explained the importance of what is said in final argument:

The very premise of our adversary system of criminal justice is that partisan advocacy on both sides of a case will best promote the ultimate objective.... [I]n a criminal trial, which is in the end basically a factfinding process, no aspect of such advocacy could be more important than the opportunity finally to marshal the evidence for each side before submission of the case to judgment.

Id. at 862, 95 S.Ct. 2550.

Moore received a grossly unfair trial twenty years ago in which his own lawyer abandoned him and called on the jury to impose the death penalty. The sentencing phase of the case should be retried with a defense lawyer who is competent and does not abandon his client. My colleagues have simply ignored and refused to recognize the extraordinary prejudice defense counsel visited upon his client.


author: SUTTON, Circuit Judge.

text:
    SUMMA HOLDINGS, INC., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 16-1712
    United States Court of Appeals, Sixth Circuit.
    Argued: February 2, 2017
    Decided and Filed: February 16, 2017

      ARGUED: Neal J. Block, BAKER & MCKENZIE, LLP, Chicago, Illinois, for Appellant. Ellen Page DelSole, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Neal J. Block, Robert S. Walton, BAKER & MCKENZIE, LLP, Chicago, Illinois, J. Timothy Bender, ROTATORI BENDER CO., L.P.A., Cleveland, Ohio, for Appellant. Ellen Page DelSole, Teresa E. McLaughlin, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
    Before: SUHRHEINRICH, SUTTON, and McKEAGUE, Circuit Judges.
   OPINION

SUTTON, Circuit Judge.

Caligula posted the tax laws in such fine print and so high that his subjects could not read them. Suetonius, The Twelve Caesars, bk. 4, para. 41 (Robert Graves, trans., 1957). That’s not a good idea, we can all agree. How can citizens comply with what they can’t see? And how can anyone assess the tax collector’s exercise of power in that setting? The Internal Revenue Code improves matters in one sense, as it is accessible to everyone with the time and patience to pore over its provisions.

In today’s case, however, the Commissioner of the Internal Revenue Service denied relief to a set of taxpayers who complied in full with the printed and accessible words of the tax laws. The Benen-son family, to its good fortune, had the time and patience (and money) to understand how a complex set of tax provisions could lower its taxes. Tax attorneys advised the family to use a congressionally innovated corporation — a “domestic international sales corporation” (DISC) to be exact — to transfer money from their family-owned company to their sons’ Roth Individual Retirement Accounts. When the family did just that, the Commissioner balked. He acknowledged that the family had complied with the relevant provisions. And he acknowledged that the purpose of the relevant provisions was to lower taxes. But he reasoned that the effect of these transactions was to evade the contribution limits on Roth IRAs and applied the “substance-over-form doctrine,” Appellee’s Br. 41, to recharacterize the transactions as dividends from Summa Holdings to the Benensons followed by excess Roth IRA contributions. The Tax Court upheld the Commissioner’s determination.

Each word of the “substance-over-form doctrine,” at least as the Commissioner has used it here, should give pause. If the government can undo transactions that the terms of the Code expressly authorize, it’s fair to ask what the point of making these terms accessible to the taxpayer and binding on the tax collector is. “Form” is “substance” when it comes to law. The words of law (its form) determine content (its substance). How odd, then, to permit the tax collector to reverse the sequence — to allow him to determine the substance of a law and to make it govern “over” the written form of the law — and to call it a “doctrine” no less.

As it turns out, the Commissioner does not have such sweeping authority. And neither do we. Because Summa Holdings used the DISC and Roth IRAs for their congressionally sanctioned purposes — tax avoidance — the Commissioner had no basis for recharacterizing the transactions and no basis for recharacterizing the law’s application to them. We reverse.

I.

A few definitions are in order, as are a few explanations about how the tax laws in this area work.

Congress designed DISCs to ineentivize companies to export their goods by deferring and lowering their taxes on export income. Here’s how the tax incentives work. The exporter avoids corporate income tax by paying the DISC “commissions” of up to 4% of gross receipts or 50% of net income from qualified exports. The DISC pays no tax on its commission income (up to $10,000,000), 26 U.S.C. §§ 991, 995(b)(1)(E), and may hold onto the money indefinitely, though the DISC shareholders must pay annual interest on their shares of the deferred tax liability, id. § 995(f). Once the DISC has assets at its disposal, it can invest them, including through low-interest loans to the export company. See 26 C.F.R. § 1.993-4. Money and other assets in the DISC may exit the company as dividends to shareholders. The Code taxes dividends paid to individuals at the qualified dividend rate, see 26 U.S.C. § 1(h)(1)(D), 1(h)(3), l(h)(ll)(B), which (since 2003) is lower than the corporate income rate that otherwise would apply to the company’s export revenue, id. § 11(a), (b). A DISC’S shareholders often will be the same individuals who own the export company. In those cases, the net effect of the DISC is to transfer export revenue to the export company’s shareholders as a dividend without taxing it first as corporate income.

Congress has made clear that corporations and other entities, including IRAs, may. own shares in DISCs. 26 U.S.C. §§ 246(d), 995(g). A corporation that owns DISC shares still has to pay the full corporate income tax on any dividends, which cancels out any tax savings. See id. § 246(d). For a time, tax-exempt entities like IRAs paid nothing on DISC dividends, which enabled export companies to shield active business income from taxation by assigning DISC stock to controlled tax-exempt entities like pension and profit-sharing plans. But Congress closed this gap in 1989 and required tax-exempt entities to pay an unrelated business income tax, set at the same rate as the corporate income tax, on DISC dividends. Id. §§ 511, 995(g).

With § 995(g), Congress made it less attractive for a traditional IRA to own shares in a DISC. Investment earnings (including dividends) generally accumulate tax-free in IRAs. Id. § 408(e)(1). But DISC dividends are subject to the high unrelated business income tax when they go into an IRA and, like all withdrawals from a traditional IRA, are subject to personal income tax when they come out. Id. § 408(d)(1).

The same considerations do not apply to the Roth IRA, which Congress created in 1997. With traditional IRAs, savers deduct contributions and pay income tax on withdrawals, including accrued gains in their accounts. Roth IRAs work in the other direction: Savers do not deduct their contributions from pre-tax income, but they take withdrawals, including accrued gains, tax-free. Id. § 408A(c)(l), (d)(1).

The Code imposes contribution limits on traditional and Roth IRAs. In 2008, the maximum annual contribution to each was $5,000. Id. §§ 219(b)(5)(A), 408A(c)(2) (2008). The maximum annual contribution to a Roth IRA decreases as an individual’s income increases. In 2008, single filers who made over $116,000 could not make any contributions to a Roth IRA. See id. § 408A(c)(3) (2008); Internal Revenue Serv., Publication 590, Individual Retirement Arrangements (IRAs), at 2 (2008).

At this point, one can begin to see why the owner of a Roth IRA might add shares of a DISC to his account. The owner of a closely held export company could transfer money from the company to the DISC, as the statute encourages, and pay some (or all) of that money as a dividend to its shareholders, allowing the money to enter the Roth IRA and grow there. The IRA account holder, it is true, would have to pay the high unrelated business income tax — here roughly 33% — when the DISC dividends go into the IRA. But once the Roth IRA receives the money, the account holder could invest it freely without having to pay capital gains taxes on increases in the value of each share or incomes taxes on the dividends received — just like other Roth IRA owners who buy shares of stock in companies that generate considerable dividends and rapid growth in share value. As with all Roth IRAs, the owner would not have to pay any individual income or capital gains taxes when the assets leave the account after he hits the requisite retirement age.

That’s how the tax laws worked at the time of the relevant transactions. Here’s how the Benenson family and the relevant companies put them to use.

Summa Holdings is the parent corporation of a group of companies that manufacture a variety of industrial products. Its two largest shareholders are James Be-nenson, Jr. (who owned 23.18% of the company in 2008) and the James Benenson III and Clement Benenson Trust (which owned 76.05% of the company in 2008). James Benenson, Jr. and his wife serve as the trustees, and their children, James III and Clement, are the beneficiaries of the Trust.

In 2001, James III and Clement each established a Roth IRA and contributed $3,500 apiece. Just weeks after the Benen-sons set up their accounts, each Roth IRA paid $1,500 for 1,500 shares of stock in JC Export, a newly formed DISC. The Commissioner did not challenge the valuation of these shares then and has not challenged them since. To prevent the Roth IRAs from incurring any tax-reporting or shareholder obligations by owning JC Export directly, the Benensons formed another corporation, JC Holding, which purchased the shares of JC Export from the Roth IRAs. From January 31, 2002 to December 31, 2008, each Roth IRA owned a 50% share of JC Holding, which was the sole owner of JC Export.

With this chain of ownership in place, the family, trust, and company were a few clicks away from the possibility of considerable future tax savings. Summa Holdings paid commissions to JC Export, which distributed the money as a dividend to JC Holding, its sole shareholder. JC Holding paid a 33% income tax on the dividends, then distributed the balance as a dividend to its shareholders, the Benensons’ two Roth IRAs. From 2002 to 2008, the Benen-sons transferred $5,182,314 from Summa Holdings to the Roth IRAs in this way, including $1,477,028 in 2008. By 2008, each Roth IRA had accumulated over $3 million.

In 2012, the Commissioner issued notices of deficiency to Summa Holdings, the Benensons, and the Benenson Trust for the 2008 tax year but did not do so for the earlier tax years. The Commissioner informed Summa Holdings that he would apply the “substance-overrform” doctrine and reclassify the payments to JC Export as dividends from Summa Holdings to its major shareholders. As recast, the transfers did not count as commissions from Summa Holdings to JC Export. That meant Summa Holdings had to pay income tax on the DISC commissions it deducted, and JC Holding obtained a refund for the corporate income tax it had paid on its dividend from JC Export. The commissions became dividends to Benenson Jr. and the Trust, all in proportion to their ownership shares. The Commissioner determined that each Roth IRA received a contribution of $1,119,503. Because James III and Clement both made over $500,000 in 2008, they were not eligible to contribute anything to their Roth IRAs. The Commissioner imposed a six-percent excise tax penalty on the contributions. See 26 U.S.C. § 4973. The Commissioner also imposed a $56,182 accuracy-related penalty on Summa Holdings. See id. §§ 6662, 6662A.

Summa Holdings and the Benensons challenged the Commissioner’s action in the Tax Court. It upheld the Commissioner’s recharacterization of the transactions but not the accuracy-related penalty. Sum-ma Holdings, which has its principal place of business in Ohio, challenged that decision in our court. Id. § 7482(a). The Be-nensons and the Trust have related appeals pending before the First and Second Circuits.

II.

In assessing the Tax Court’s decision, we begin with a basic point: The Internal Revenue Code allowed Summa Holdings and the Benensons to do what they did. Section 995(g) expressly contemplates that tax-exempt entities like traditional IRAs may own DISC shares. It just requires that they pay unrelated business income tax on any dividends. The Benensons paid those taxes. Section 408A requires the Commissioner to treat Roth IRAs the same as traditional IRAs unless the Code says otherwise. When it comes to DISC dividends, the Code does not say otherwise. Both sides to this dispute thus agree that these transactions, as consummated, complied in full with the Internal Revenue Code. If this case dealt with any other title of the United States Code, we would stop there, end the suspense, and rule for Sum-ma Holdings and the Benensons.

But when it comes to the Internal Revenue Code, the Commissioner claims a right to reclassify Code-compliant transactions under the “substance-over-form doctrine” in order to respect “overarching ... principles of federal taxation.” Appellee’s Br. 39, 41. Overarching indeed. As he sees it, the doctrine allows him to nullify the DISC commissions and dividends to the Roth IRAs on the ground that the purpose of the transactions was to sidestep the contribution limits on Roth IRAs and lower the tax obligations of the Benenson sons in the process. That is a step too far. It’s one thing to permit the Commissioner to recharacterize the economic substance of a transaction — to honor the fiscal realities of what taxpayers have done over the form in which they have done it. But it’s quite another to permit the Commissioner to recharacterize the meaning of statutes — to ignore their form, their words, in favor of his perception of their substance.

As originally conceived and as traditionally used, the substance-over-form doctrine has something to it. In writing the tax laws, Congress uses many general terms— “income,” “indebtedness,” “corporate reorganization” — that refer to real-world economic activities, and it assigns tax consequences to those activities. When the courts decide how to classify a transaction, they focus, quite appropriately, on the transaction’s workaday realities, not the labels used by the taxpayers. Take “income.” If a taxpayer receives something of value, 26 U.S.C. § 61(a), he can call it whatever he wants — this, that, or something else. What the taxpayer cannot do is claim that the label he affixes on the transaction precludes it from being “income” under the Code or prevents the courts from treating it as “income” under the Code.

Diedrich v. Commissioner illustrates the point. It held that when a donor gives a monetary gift on the condition that the recipient pay the gift tax, the donor has received taxable “income” from the recipient equal to the tax paid. 457 U.S. 191, 196-97, 102 S.Ct. 2414, 72 L.Ed.2d 777 (1982). That’s sensible. The dollars-and-cents reality is that the donor “sold” the gift to the recipient for the price of the gift tax, making it appropriate (if a tad ungrateful) to require the donor, not the donee, to pay taxes on the income from the sale. A focus on the economic substance of the transaction is just what the Code contemplates and just what the Commissioner and courts may consider.

What’s sometimes called the “sham” transaction doctrine, but which comes to the same end, likewise looks to the economic realities of the business deal. The Commissioner may disregard a nominally independent entity, for example, if it is an impostor — a label/form placed on the entity to disguise its substanee/economic reality. Wells Fargo & Co. v. United States, 641 F.3d 1319, 1325 (Fed. Cir. 2011). Here too courts ask whether the transaction has any “economic substance” to it. See Richardson v. Comm’r, 509 F.3d 736, 741 (6th Cir. 2007). Congress has codified this principle for transactions after 2010, 26 U.S.C. § 7701(o), and, relatedly, has long empowered the Commissioner and the courts to pierce the corporate veil and reallocate income among jointly controlled entities if the owner shifts assets around for tax purposes in a way that would never result from genuine arm’s-length transactions. Id. § 482; 26 C.F.R. § 1.482-1.

Hence: A corporation that shuffles shares from one entity to another in order to avoid capital gains tax may not obtain the tax benefits that come with a genuine corporate “reorganization.” Gregory v. Helvering, 293 U.S. 465, 468-69, 55 S.Ct. 266, 79 L.Ed. 596 (1935); Minn. Tea Co. v. Helvering, 302 U.S. 609, 612-13, 58 S.Ct. 393, 82 L.Ed. 474 (1938). A taxpayer is not “indebted” — and thus not entitled to deduct his interest payments — when the “loan” has no business function other than enabling those deductions and does not create a true obligation to pay interest. Knetsch v. United States, 364 U.S. 361, 365-66, 81 S.Ct. 132, 5 L.Ed.2d 128 (1960). And when a family sets up an ordinary corporation owned by Roth IRAs and pays the corporation fees for sham “services” that it never performed, the Commissioner may rightly refuse to recognize the Roth IRA’s gains as investment earnings and may reclassify them as contributions. See Repetto v. Comm’r, 103 T.C.M. (CCH) 1895, at *9 (2012).

But these economic-substance principles — which undergird the traditional use of the substance-over-form doctrine — do not give the Commissioner purchasing power here. Congress designed DISCs to enable exporters to defer corporate income tax. The Code authorizes companies to create DISCs as shell corporations that can receive commissions and pay dividends that have no economic substance at all. See 26 C.F.R. § 1.994-1(a); Addison Int'l Inc. v. Comm’r, 887 F.2d 660, 666 (6th Cir. 1989); Jet Research, Inc. v. Comm’r, 60 T.C.M. (CCH) 613 (1990). By congressional design, DISCs are all form and no substance, making it inappropriate to tag Summa Holdings with a substance-over-form complaint with respect to its use of DISCs.

The same is true for the Roth IRAs. They, too, are designed for tax-reduction purposes; And that’s just how the Benen-sons used them. At the time, the Internal Revenue Code permitted traditional and Roth IRAs to own DISCs, and for reasons of its own Congress said that both types of IRAs should be treated the same. All IRAs are permitted to hold shares of stock, some of which may increase markedly in value over time and some of which may generate considerable dividends over time. Whether Congress’s decision to permit Roth IRAs to own DISCs was an oversight makes no difference. It’s what the law allowed.

So far so good. The Commissioner, Sum-ma Holdings, and we share the same understanding of these versions of the substance-over-form doctrine, and we all agree that they don’t apply here. None of these transactions was a labeling-game sham or defied economic reality.

That leaves the Commissioner to invoke another, distinct version of the substance-over-form doctrine. When two potential options for structuring a transaction lead to the same end and the taxpayers choose the lower-tax path, the Commissioner claims the power to rechar-acterize the transactions as the higher-taxed equivalents. It’s not that the transactions don’t have economic substance (they do) or that the Code forbids them (it doesn’t). Instead, the Commissioner simply stipulates that the “real” transaction is the higher-taxed one, and that the lower-taxed route, often the more complex of the two, is a mere “formality” he can freely disregard. The Commissioner claims the right to assert this power against “any given transaction[,] based on [the] facts and circumstances” of the arrangement. Appellee’s Br. 63. That is a much broader (and more worrisome) version of the doctrine.

In the Commissioner’s defense, a kernel of this idea does not come out of left field. As support, he points to a seventy-two-year-old opinion of the Supreme Court. In Commissioner v. Court Holding Co., the taxpayers wound up their corporation, transferred its sole asset — an apartment building — to themselves as a liquidating • dividend, then sold the building to a third party. 324 U.S. 331, 333, 65 S.Ct. 707, 89 L.Ed. 981 (1945). But in a real-world economic sense, the Court held, the corporation sold the building directly to the buyer. Id. at 333-34, 65 S.Ct. 707. Justice Black’s opinion for a unanimous court is brief, and it’s hard to say whether the Court determined that the liquidation before the sale was a sham or recharacterized the transactions based solely on their tax-minimizing effect.

As Court Holding suggests, the line between disregarding a too-clever-by-half accounting trick and nullifying a Code-supported tax-minimizing transaction can be elusive. Some cases from our court, fact specific though they are, offer hints of a broad reading of Court Holding, saying that the Commissioner may recharacterize transactions, even those with economic substance, if they have no “valid, non-tax business purpose.” Estate of Kluener v. Comm’r, 154 F.3d 630, 636 (6th Cir. 1998) (recharacterizing sale of horses from closely held corporation as direct sale from the corporation’s owner); see also Aeroquip-Vickers, Inc. v. Comm’r, 347 F.3d 173, 183 (6th Cir. 2003) (refusing to treat a series of transactions as a “corporate reorganization” where taxpayer intended to avoid reporting recaptured tax credits). Decisions from our sister courts also straddle the line between holding that the transactions were a sham and suggesting that the Commissioner has a broad power to re-characterize transactions that minimize taxes, though none of them holds that a tax-avoidance motive alone may nullify an otherwise Code-compliant and substantive set of transactions. See, e.g., Feldman v. Comm’r, 779 F.3d 448, 457 (7th Cir. 2015) (disregarding sham loan designed to avoid income tax); Southgate Master Fund, LLC ex rel. Montgomery Capital Advisers, LLC v. United States, 659 F.3d 466, 491-92 (5th Cir. 2011) (disregarding sham partnership); Rogers v. United States, 281 F.3d 1108, 1113-18 (10th Cir. 2002) (recharac-terizing a secured loan that had no likelihood of ever being repaid as a sale).

A broad reading of Court Holding, at least as advanced by the Commissioner here, is hard to square with the Supreme Cpurt’s textually respectful methods of statutory interpretation. Keep in mind what is at issue in each of these cases: the meaning of words in the Code like “income,” “reorganization,” and “debt,” or as here words like “contribution” or “dividend.” It’s fine — indeed essential — to attend to economic realities in deciding whether one of these terms covers a transaction. But it’s odd to reject a Code-compliant transaction in the service of general concerns about tax avoidance. Before long, allegations of tax avoidance begin to look like efforts at text avoidance. What started as a tool to prevent taxpayers from placing labels on transactions to avoid tax consequences they don’t like runs the risk of becoming a tool that allows the Commissioner to place labels on transactions to avoid textual consequences he doesn’t like.

The substance-over-form doctrine, it seems to us, makes sense only when it holds true to its roots — when the taxpayer’s formal characterization of a transaction fails to capture economic reality and would distort the meaning of the Code in the process. But who is to say that a low-tax means of achieving a legitimate business end is any less “substantive” than the higher-taxed alternative? There is no “patriotic duty to increase one’s taxes,” as Judge Learned Hand memorably told us in the case that gave.rise to the economic-substance doctrine. Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934). “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury.” Id. If the Code authorizes the “formal” transactions the taxpayer entered into, then “it is of no consequence that it was all an elabórate scheme to get rid of income taxes.” Id.; see also David P. Hariton, Sorting Out the Tangle of Economic Substance, 52 Tax Law. 235, 236-41 (1999).

Professor Joseph Isenbergh put the point well: “When someone calls a dog a cow and then seeks a subsidy provided by statute for cows, the obvious response is that this is not what the statute means. It may also happen that rich people who would not otherwise have cows buy them to gain cow subsidies. Here, when people say (as they do) that this is not what the statute means, they are in fact saying something quite different.” ■ Musings on Form and Substance in Taxation: Federal Taxation of Incomes, Estates, and Gifts, 49 U. Chi. L. Rev. 859, 865 (1982).

Although the distinction between transactions that obscure economic reality and Code-compliant, tax-advantaged transactions may be difficult to identify in some cases, the transactions in this case are clearly on the legitimate side of the line. The Commissioner’s effort to reclassify Summa Holding’s transactions as dividends followed by Roth IRA contributions does not capture economic reality any better than describing them as DISC commissions followed by dividends to the DISC’S shareholders. In what way is this “substantively” a contribution? Sure, the transaction in one sense looks like a Roth IRA contribution given the flow of money through the DISC and into the IRAs. But on balance the transaction looks even more like what it was — DISC commissions followed by dividends to the Roth IRAs. This is not a case where the taxpayers followed a “devious path” to a certain result in order to avoid the tax consequences of the “straight path,” as in Kluener and Aeroquip-Vickers. See Minn. Tea Co., 302 U.S. at 613, 58 S.Ct. 393. Both paths involve two straightforward steps: a disbursement from Summa Holdings (to either the DISC or the Benensons) followed by a transfer to the Roth IRAs (either as a dividend or a contribution).

When the Commissioner says that the transaction amounted in substance to a Roth IRA contribution, all he means is that the purpose of the transaction was to funnel money into the Roth IRAs without triggering the contribution limits. True enough. But the substance-over-form doctrine does not authorize the Commissioner to undo a transaction just because taxpayers undertook it to reduce their tax bills.

Note that this broad recharacterization power travels along a one-way street. To our knowledge, the Commissioner has never used this power to reclassify the form of a taxpayer’s Code-compliant transaction to reduce his tax liabilities in the service of broader purposes of the Code. But if this were a legitimate doctrine, why wouldn’t it run in both directions? Many provisions of the Code owe their existence solely to tax-reducing purposes: to lower current taxes or to shelter income from taxes over time.

Only a parody of a purpose-based approach to interpretation, unanchored to statutory text, could justify a one-way use of this power. A broad recharacterization power runs in one direction only if we pitch the Internal Revenue Code’s purpose at an Emperor’s level of generality — that the “overarching” purpose of the Code, Appellee’s Br. 39, is to increase revenue to the government. Then and only then could we say: When a taxpayer structures a business transaction in order to lower his tax bill, he undermines the revenue-increasing purposes of the Code and thus invites the Commissioner to recharacterize the transaction. But that view overlooks the subtleties of the Code, which create many discrete rules that balance many competing rationales. Doesn’t a company have the right to do business as an S corporation rather than a C corporation based solely on tax-reduction considerations? Doesn’t a company’s management indeed have a fiduciary duty to make decisions on that basis? And what of using the corporate form at all? That’s a liability-limiting choice after all. The best way to effectuate Congress’s nuanced policy judgments is to apply each provision as its text requires — not to elevate purpose over text when taxpayers structure their transactions in unanticipated tax-reducing ways.

Yes, finite language must account for infinite tax transactions. And yes, we appreciate the challenges Congress faces in this area — an endless supply of tax-reducing ingenuity. See ASA Investerings P’ship v. Comm’r, 201 F.3d 505, 513 (D.C. Cir. 2000). But if there is one title of the United States Code most deserving of attention to text, it is Title 26. These are not the sparing terms of the Sherman Antitrust Act. This is the highly reticulated Internal Revenue Code, which uses language, lots of language, with nearly mathe-matic precision. Is there any other title of the United States Code that has devoted more carefully drawn words to reducing its purpose to text? Perhaps the Commissioner’s approach made some sense decades ago, when the Code was simpler, and before Congress decided to pursue a wide range of policy goals through a- complicated set of tax credits, deductions, and savings accounts. But today, of all areas of law that should resist judicial innovation based on misty calls to higher purposes, this would seem to be it.

Statutory purpose no doubt has a role to play, even in its most capacious and inviting forms. “[T]he meaning of a sentence may be more than that of the separate words, as a melody is more than the notes.” Gregory, 69 F.2d at 810-11 (Hand, J.). “A word is not a crystal, transparent and unchanged, it is the skin of a living thought.” Towne v. Eisner, 245 U.S. 418, 425, 38 S.Ct. 158, 62 L.Ed. 372 (1918) (Holmes, J.). And all that. But purpose must be grounded in text. It cannot be invoked to save the statute from itself.

Even if we were willing to endorse the Commissioner’s recharacterization power in its full flowering form — disregarding transactions based solely on an individual’s tax-minimizing motive — he could not use it here. No court has used this power to override statutory provisions whose only function is to enable tax savings, as the Commissioner seeks to do in this instance. The Code authorizes DISC commissions and dividends, regardless of whether they have economic substance, in order to reduce the tax burden of exporters. And the Code authorizes investors to avoid significant taxes on capital gains and dividends by using their Roth IRAs in all manner of tax-avoiding ways, including by buying shares in promising new companies whose share prices may rise considerably over time or which may pay out large dividends over time. Deborah L. Jacobs, How a Serial Entrepreneur Built a $95 Million Tax Free Roth IRA, Forbes (Mar. 20, 2012); Government Accountability Office, IRS Could Bolster Enforcement on Multimillion Dollar Accounts, but More Direction from Congress Is Needed (October 20, 2014); William D. Cohan, The Secret Behind Romney’s Magical IRA, Bloomberg (July 15, 2012, 6:30 PM). The point of these entities is tax avoidance. The Commissioner cannot place ad hoc limits on them by invoking a statutory purpose (maximizing revenue) that has little relevance to the text-driven function of these portions of the Code (minimizing revenue).

The Commissioner persists that Congress intended Roth IRAs to be used only by median-income and low-income taxpayers, as evidenced by the contribution and income limits. We have our doubts. When pressed, the Commissioner knew of no empirical data to support the point. At any rate, Congress’s decision in 2005 to allow owners of traditional IRAs, who can make contributions regardless of income, to roll them over into Roth IRAs no matter how many assets the accounts hold or how high the owners’ incomes, see 26 U.S.C. § 408A(d)(3), undercuts this contention. Those rollovers permit high-income taxpayers to avoid the income limits on Roth IRA contributions, just as the DISC permitted Summa Holdings to avoid the contribution limits. The Commissioner cannot fault taxpayers for making the most of the tax-minimizing opportunities Congress created.

The Commissioner adds that the “critical point” of his argument is.that the tax benefits Summa Holdings has enjoyed were “unintended by both the Roth IRA and DISC provisions.” Appellee’s Br. 45. He may be right. And he may be right that permitting these DISC-Roth IRA arrangements amounts to dubious tax policy. But the substance-over-form doctrine does not give the Commissioner a warrant to search through the Internal Revenue Code and correct whatever oversights Congress happens to make or redo any policy missteps the legislature happens to take. Congress created the DISC and empowered it to engage in purely formal transactions for the purpose of lowering taxes. And Congress established Roth IRAs and their authority to own shares in corporations (including DISCs) for the purpose of lowering taxes. That these laws allow taxpayers to sidestep the Roth IRA contribution limits may be an unintended consequence of Congress’s legislative actions, but it is a text-driven consequence no less. Congress likewise did not expect it would increase the utility of DISCs when it lowered the qualified dividend rate in 2003, but no one would argue that DISC dividends should still be taxed at the old rate. See Michael S. Fried, Combined Effects of Recent Legislation Breathe New Life into the IC-DISC, 118 J. Tax’n 220, 224-25 (2013).

This is not the first time, for what it is worth, that DISCs have caused the Federal Government trouble. In the 1980s, some countries alleged that DISCs illegally subsidized U.S. exports in violation of the General Agreement on Tariffs and Trade. Congress responded by requiring shareholders to pay annual interest on their deferred tax liability. See Deficit Reduction Act of 1984, Pub. L. No. 98-369, § 801(a), 98 Stat. 494, 985. And Congress addressed one problem created by tax-exempt entities like IRAs by imposing the unrelated business income tax on their DISC dividends. If Congress sees DISC-Roth IRA transactions of this sort as unwise or as creating an improper loophole, it should fix the problem. Until then, the DISC will continue to provide tax savings to the owners of U.S. export companies, just as Congress intended — even if subsequent changes to the Code have increased the scale of the savings beyond Congress’s original estimation. The last thing the federal courts should be doing is rewarding Congress’s creation of an intricate and complicated Internal Revenue Code by closing gaps in taxation whenever that complexity creates them.

For these reasons, we reverse.


author: ROGERS, Circuit Judge.

text:
    AGILITY NETWORK SERVICES, INC., an Illinois Corporation; Chandler Denny; Cinnamon Denny, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
    No. 15-2599
    United States Court of Appeals, Sixth Circuit.
    Argued: January 31, 2017
    Decided and Filed: February 17, 2017

      ARGUED: Matthew S. DePerno, DE-PERNO LAW OFFICE, PLLC, Kalamazoo, Michigan, for Appellants. Gretchen M. Wolfinger, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Matthew S. De-Perno, DEPERNO LAW OFFICE, PLLC, Kalamazoo, Michigan, for Appellants. Gretchen M. Wolfinger, Bruce R. Ellisen, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
    Before: GIBBONS, ROGERS, and McKEAGUE, Circuit Judges.
   OPINION

ROGERS, Circuit Judge.

After receiving a notice of federal tax lien and a notice of intent to levy, taxpayers Agility Network Services, Inc., Cinnamon Denny, and Chandler Denny request-' ed that the IRS hold a Collection Due Process hearing. The IRS took five months to process the request, and when the Office of Appeals finally held a hearing, the presiding agent refused to discuss multiple issues with the taxpayers. They were still dissatisfied after a second hearing before a different agent and sued the Government for the IRS agents’ alleged misbehavior under 26 U.S.C. § 7433, which provides a damages remedy against the United States for certain actions of IRS officers or employees “in connection with any collection of Federal tax.” The taxpayers also requested a temporary restraining order against further tax-collection efforts. The district court properly dismissed all claims because the activity challenged in this case did not fall within the scope of § 7433, and because the Tax Anti-Injunction Act precludes the court from issuing a restraining order.

Before the federal government levies a tax against someone or files a lien on a taxpayer’s property, the IRS must notify the taxpayer that he has a right to a Collection Due Process (CDP) hearing. 26 U.S.C. §§ 6320(a)(3)(B), 6330(a)(1). If the taxpayer requests one, an impartial officer from the IRS Office of Appeals will conduct the hearing. Id. §§ 6320(b), 6330(b). While CDP proceedings are pending, the IRS must suspend its collection efforts. Id. § 6330(e)(1). The taxpayer “may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy, including ... challenges to the appropriateness of collection actions” and “offers of collection alternatives.” Id. § 6330(c)(2)(A). The taxpayer may also challenge the underlying tax liability if he “did not receive any statutory notice of deficiency ... or did not otherwise have an opportunity to dispute” the liability. Id. § 6330(c)(2)(B). When making a determination based on the hearing, the presiding officer must consider the issues raised by the taxpayer and “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.” Id. § 6330(c)(3)(B), (C). If after the hearing the Office of Appeals decides to uphold the proposed levy or sustain the notice of federal tax lien, it will issue a notice of determination to that effect. Treas. Reg. § 301.6330 — 1(f)(1) (as amended in 2016).

The plaintiffs in this case, Cinnamon Denny, Chandler Denny, and their company, Agility Network Services, Inc., have alleged that the IRS mistreated them during the CDP hearing process. Cinnamon Denny owns Agility, and her husband, Chandler Denny, is an employee at Agility (collectively, the taxpayers). On April 17, 2012, the IRS filed a notice of federal tax lien against Agility for overdue employment taxes. On May 21, 2012, the IRS filed a notice of intent to levy based on the same overdue taxes. On May 23, Agility requested a CDP hearing in connection with the proposed lien and levy. Despite the May request, the IRS did not hold the hearing until December 20. According to the taxpayers, Revenue Officer McKinzie intentionally caused the delay by refusing to forward the hearing request to the Office of Appeals in an attempt to pursue a penalty against the Dennys individually. The IRS scheduled the hearing only after the taxpayers filed an application for taxpayer assistance with the Taxpayer Advocate.

IRS Appeals Agent Jaclyn Allen presided over the December 20 hearing. The taxpayers “outlined multiple issues they wanted to discuss at the hearing, including a request for penalty abatement, collection tactics used as leverage and in an underhanded manner that violated due process, and collection alternatives,” but Allen limited the discussions. In particular: Allen refused to investigate the taxpayers’ assertion that they tried to make payments but that the IRS refused to accept them; Allen misstated the tax code and Internal Revenue Manual while offering excuses for Officer McKinzie’s failure to process the taxpayers’ CDP request; Allen refused to discuss the taxpayers’ requested installment plan, reasoning that they did not make enough money to justify one; and Allen denied the taxpayers’ request to abate penalties. Furthermore, Allen stated at the hearing “that she knew ... McKin-zie’s actions were made with the genuine intent to help the taxpayers.” The taxpayers contend that this statement proves Allen had an impermissible ex parte communication with McKinzie. The hearing ended with the taxpayers having discussed only one issue of the many they had planned to raise.

In May 2013, the taxpayers received notice that Allen had scheduled another meeting. After Allen denied the taxpayers’ request to record the meeting, their attorney called IRS Appeals Manager Diane Villa. Villa then “determined that Agent Allen was biased and reassigned the case to IRS Appeals Agent Leonard Hanline,” who held a second hearing on July 15, 2013. Hanline told the taxpayers that they were now dealing with a “well-trained” agent and “that he was just then starting the due process for” them. At the hearing, the taxpayers requested that the IRS withdraw the lien and allow them to set up an installment plan. But Hanline refused the request. He reasoned — contradicting Allen’s earlier rationale — that the taxpayers made too much money to warrant an installment plan. Hanline also refused to abate penalties. Furthermore, he “found nothing wrong with the actions taken by ... McKinzie or Agent Allen.” Instead of working out an alternative collection plan with the IRS, the taxpayers “began a self-imposed $5,000.00 per month payment plan,” which they are still following.

Dissatisfied with their treatment during the CDP hearings, the taxpayers sued the United States, seeking damages for violations of 26 U.S.C. § 7433 and requesting “a Temporary Restraining Order (TRO) preventing any further collection action.” The district court granted the Government’s motion to dismiss all claims. See Agility Network Servs., Inc. v. United States, No. 1:14-CV-1310, 2015 WL 9591356 (W.D. Mich. Nov. 23, 2015). The court first reasoned that the waiver of the federal government’s sovereign immunity in § 7433 does not encompass the taxpayers’ suit, because' the provision, narrowly construed, applies only “to conduct specifically related to the actual collection of taxes,” which does not include CDP hearings. See id. at *3. The court then held that the taxpayers’ request for a TRO was barred by the Tax Anti-Injunction Act, 26 U.S.C. § 7431(a), as a request to restrain the government’s tax-collection efforts. See id. at *4. The taxpayers now appeal.

The United States has not consented to being sued in this case, and the district court therefore lacked jurisdiction to hear the taxpayers’ § 7433 claim. A person may sue the federal government for damages under 26 U.S.C. § 7433 “[i]f, in connection with any collection of Federal tax with respect to [the] taxpayer, any officer or employee of the- Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of’ the tax code or any regulation promulgated thereunder. The present suit falls outside this waiver of sovereign immunity because the challenged conduct did not occur in connection with tax collection.

As a preliminary matter, because the taxpayers have challenged IRS conduct that occurred solely during or in connection with CDP hearings, the question of whether IRS conduct was “in connection with any collection of Federal tax” is limited to the conduct at the CDP hearings. The only IRS action to occur outside of the CDP hearings that is described in the taxpayers’ complaint is Revenue Officer McKinzie’s intentional delay in forwarding the hearing request to the Office of Appeals. But, in describing their § 7433 claim in the complaint, the taxpayers focus almost exclusively on Allen’s and Hanline’s conduct during the two CDP hearings. The complaint mentions McKinzie only in a vague allegation that McKinzie and the other agents “demonstrated bias” and in allegations that Allen and Hanline refused to investigate or “give any consideration” to McKinzie’s misconduct. The taxpayers’ administrative claim similarly omits McKinzie’s delay while defining the § 7433 claim. Such brief mentions of McKinzie’s conduct in the complaint hardly put the Government on notice that the taxpayers have sued for damages based on McKin-zie’s refusal to forward the hearing request. Therefore, we examine only whether the taxpayers have a cognizable claim for damages based on Allen’s and Han-line’s conduct during the CDP hearings.

The relevant question, then, is whether an IRS agent acts “in connection with any collection of Federal tax” when she conducts a CDP hearing. Under the most reasonable interpretation of the phrase, the answer is no. In common parlance, an IRS agent acting in connection with tax collection would be taking an affirmative step to recover money owed to the government. In contrast, a CDP hearing is a right bestowed upon a taxpayer, at the taxpayer’s request, to provide protection from abusive or unduly burdensome tax collection. The hearing does not help the IRS collect on a tax debt, but in fact impedes collection, at least temporarily, to the taxpayer’s benefit. Several characteristics of CDP hearings reflect this protective role: the IRS must halt its levy efforts while the proceedings are pending, 26 U.S.C. § 6330(e)(1); the presiding appeals officer must verify “that the requirements of any applicable law or administrative procedure have been met,” id. § 6330(c)(1); and the appeals officer is instructed to consider whether any proposed collection action balances the need for efficient tax collection with “the legitimate concern of the person that any collection action be no more intrusive than necessary,” id. § 6330(c)(3)(C). Furthermore, if a taxpayer has not already had the opportunity to challenge his underlying tax 1⅛ bility, he may do so at the hearing. Id. § 6330(c)(2)(B). As these provisions suggest, the IRS does not hold CDP hearings to further its collection efforts, but rather to provide a forum for taxpayers to challenge potentially erroneous or unduly burdensome • tax collection activities before they are allowed to proceed.

A second, broader interpretation of “in connection with any collection of Federal tax” is plausible but ultimately less reasonable. Under this reading, any IRS agency action involving a person who owes a tax debt is “in connection with tax collection.” Under this interpretation, an IRS agent acts in connection with tax collection during a CDP hearing because, at that point, the IRS has already initiated the levy or lien process against the taxpayer. However, two principles of statutory construction overcome this interpretation. First, courts must avoid interpretations that render statutory language superfluous. Ford Motor Co. v. United States, 768 F.3d 580, 587 (6th Cir. 2014). Section 7433, if read in this way, would encompass almost everything IRS agents do. The agency exists to collect revenue, after all. Thus, under this interpretation, § 7433’s limiting language imposes no limit, thereby rendering the language surplusage. Second, waivers of the immunity of the United States are construed narrowly, “with any reasonable doubts resolved in the government’s favor.” Blackmon v. United States, 807 F.2d 70, 74 (6th Cir. 1986). As between two reasonable interpretations of ambiguous statutory language, this principle favors the narrower waiver. Therefore, because § 7433 is a waiver of sovereign immunity, reading the phrase broadly to encompass nearly everything IRS employees do is disfavored. Thus, because a broad interpretation of § 7433 violates these principles of statutory interpretation, the narrow reading described first above — -under which CDP hearings are not held “in connection with any collection of Federal tax” — is the proper reading of the statute.

The definition of “collection action” in Treas. Reg. § 301.7430-3 (1994) does not change this result, because it does not control § 7433. The regulation corresponds to 26 U.S.C. § 7430, which allows a prevailing party in an “administrative or court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax” to collect costs. The regulation defines “administrative proceeding” to exclude “[p]roceedings in connection with collection actions (as defined in paragraph (b) of this section).” Treas. Reg. § 301.7430-3(a)(4). The regulation goes on to define “collection action”:

A collection action generally includes any action taken by the Internal Revenue Service to collect a tax (or any interest, additional amount, addition to tax, or penalty, together with any costs in addition to the tax) or any action taken by a taxpayer in response to the Internal Revenue Service’s act or failure to act in connection with the collection of a tax (including any interest, additional amount, addition to tax, or penalty, together with any costs in addition to the tax). For example, a collection action for purposes of section 7430 and this section includes any action taken by the Internal Revenue Service under chapter 64 of subtitle F to collect a tax. Collection actions also include those actions taken by a taxpayer to remedy the Internal Revenue Service’s failure to release a lien under section 6325 and to remedy any unauthorized collection action as defined by section 7433, except those collection actions described by section 7433(e).

Id. § 301.7430-3(b) (as amended before February 2016).

Regardless of whether a CDP hearing is a “collection action” within the meaning of Treas. Reg. § 301.7430-3, the regulation has no bearing on whether CDP hearings occur “in connection with any collection of Federal tax” under 26 U.S.C. § 7433. Twice the regulation indicates that its definitions do not apply outside of 26 U.S.C. § 7430. First, the regulation defines “administrative proceeding” “[f]or purposes of section 7430.” Id. § 301.7430-3(a). Then, when describing that agency action taken under Chapter 64 of Subtitle F — which includes §§ 6320 and 6330, governing CDP hearings — is collection action, the regulation qualifies: “[A] collection action for purposes of section 74-30 and this section includes any action taken by the Internal Revenue Service under chapter 64 of subtitle F to collect a tax.” Id. § 301.7430-3(b) (emphasis added). Another contextual clue further indicates that the regulation’s definition does not apply to the phrase “in connection with any collection of Federal tax” in § 7433. The regulation states that a lawsuit brought under § 7433 is a “collection action.” Id. But, because § 7433 expressly covers only IRS employees’ conduct, a lawsuit brought by taxpayers cannot be the type of act in connection with tax collection contemplated by the provision. It is therefore impossible to substitute conduct “in connection with any collection of Federal tax” under § 7433 with the regulation’s definition of “collection action” in § 301.7430-3(b).

The Taxpayer Advocate’s 2013 Report also makes no difference. See Taxpayer Advocate Serv., National Taxpayer Advocate 2013 Annual Report to Congress, Volume One (2013). The report points out that the Office of Appeals uses the Collection Internal Revenue Manual in CDP proceedings to: “[v]erify whether administrative procedures were followed in issuing the [notice of federal tax lien or notice of levy];” “[rjeview Collection case actions and decisions; and” “[ejvaluate alternatives to collection action.” Id. at 161-62. This reveals that the Appeals Office uses the collection guidelines to evaluate the Collection Office’s activities, but the Appeals Office does not somehow become the collection arm of the IRS by using the Collection manual for these purposes.

Finally, the taxpayers are not entitled to an injunction against further collection efforts. The Tax Anti-Injunction Act, 26 U.S.C. § 7421(a), prevents suits brought “for the purpose of restraining the assessment or collection of any tax.” The taxpayers’ complaint asks for a TRO “preventing any further collection action and [requiring the] return of the auctioned property.” This is clearly a request for an injunction inhibiting the government from collecting on the taxpayers’ tax debt, which § 7421(a) prohibits. Furthermore, the limited exception to § 7421(a)’s ban recognized in Enochs v. Williams Packing & Navigation Co., Inc., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), does not apply. If “under no circumstances could the Government ultimately prevail,” and' “equity jurisdiction otherwise exists,” a court may issue an injunction that would otherwise be barred by § 7421(a). Id. at 7, 82 S.Ct. 1125. Because the taxpayers’ § 7433 claim was properly dismissed, it is impossible to say that the Government cannot prevail. Thus, the district court also properly dismissed the taxpayers’ request for a TRO.

The judgment of the district court is affirmed.

      . A subsequent amendment added: "Collection actions also include collection due process hearings under sections 6320 and 6330 (unless the underlying tax-liability is properly at issue)....” Treas. Reg. § 301.7430-3(b) (as amended in 81 Fed. Reg. 10479, 10485 (Mar. 1, 2016)). "[A]dministrative rules will not be construed to have retroactive effect unless their language requires this result.” Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988). Therefore, the definition in effect when the taxpayers filed their lawsuit controls. The subsequent amendment also does not change the fact that the regulation's definition does not apply to § 7433.


author: POSNER, Circuit Judge.

text:
    Lamonte LAKE, Plaintiff-Appellant, v. WEXFORD HEALTH SOURCES, INC., and Carol Jackson, Defendants-Appellees.
    No. 15-2360
    United States Court of Appeals, Seventh Circuit.
    Submitted February 2, 2017
    Decided February 15, 2017
    Lamonte Lake, Pro Se.
    Douglass Bitner, Springfield, IL, Trisha K. Tesmer, Attorney, Julie Ann Teuscher, Attorney, Chicago, IL, Cassiday Schade LLP, for Defendant-Appellee.
    Before WOOD, Chief Judge, and POSNER and KANNE, Circuit Judges.
   POSNER, Circuit Judge.

Lamonte Lake, a prisoner at Illinois’ Hill Correctional Center, claims in this suit under 42 U.S.C. § 1983 that Wexford Health Sources, Inc., a contractor serving the state’s prisons, and prison dentist Carol Jackson, a Wexford employee, were deliberately indifferent, and thus in violation of the Eighth Amendment, to his need for dental care. Having lost in the district court as a result of the judge’s granting summary judgment in favor of the defendants, Lake appeals, contending that Dr. Jackson had refused to send him to an outside dentist to extract a decayed tooth that was causing him pain. He attributes this refusal to what he alleges to be a Wexford policy of withholding medical care to save money. That’s a common criticism of Wexford, see Michael Sandler, “Illinois Prison Contractor Paid $3.1 Million to Resolve Complaints Over Five Years,” Modem Healthcare, May 20, 2015, www. modernhealthcare.com/article/20150520/ NEWS/150529989 (visited Feb. 8, 2017, as were the other websites cited in this opinion); Jason Meisner, “Independent Experts Blast Quality of Medical Care in Illinois Prisons,” Chicago Tribune, May 19, 2015, www.chicagotribune.com/news/ct-illinois-prison-medieal-care-met-20150519-story.html. But there is no evidence that Dr. Jackson was incapable of competently removing a decayed tooth — usually not a highly complex procedure.

Before Dr. Jackson was employed by the prison, her predecessor as prison dentist, a Dr. Estaver, had concluded that one of Lake’s teeth, though not the one he later complained about to Dr. Jackson, should be removed. Lake insisted that an outside dentist should perform the extraction because, he said, he does not respond well to local anesthetics. Although he eventually allowed Dr. Estaver to extract the tooth, it shattered when Estaver tried to pull it, causing significant pain. Lake was sent to an outside specialist to complete the extraction — but not before he told Es-taver that the fillings in two other teeth had fallen out.

The filling in one was temporarily replaced by Estaver, but when Dr. Jackson replaced Estaver as the prison dentist, Lake told her that both teeth needed treatment, because the filling he’d received from Dr. Estaver was only temporary and both teeth were still causing pain. Dr. Jackson told Lake that one of the teeth would have to be pulled, but the record is silent on what treatment Dr. Jackson recommended for the other one.

The tooth that the dentist said would have to be pulled is the crux of the appeal. Lake again wanted the extraction done by' an outside specialist. Although Dr. Jackson assured him that his mouth could be numbed successfully by use of a technique that had not been employed by her predecessor, Lake continued to refuse to let her pull the tooth and even complained to Wexford that he was suffering needlessly because of its refusal to provide him with treatment by providers of dental care who were outside the prison. Wexford replied that its staff at Hill Correctional Center was qualified and dedicated — and there is no contrary evidence besides Lake’s say-so.

Dr. Jackson left Hill late in 2014 and Lake later agreed to let a different prison dentist extract the tooth. A local anesthetic was used during the extraction, but Lake complained afterward that the procedure had been painful.

The district judge ruled that, on the basis of the evidence summarized above, a jury would have to find that Dr. Jackson had been exercising professional judgment in predicting that administering a local anesthetic would enable her to extract the decayed tooth without inflicting significant pain. And indeed on this record the only reasonable inference is that Lake, not Dr. Jackson or Wexford, delayed the removal of the decayed tooth that he complained about to Dr. Jackson. Although he contends that she should have explained to him in greater detail the additional precautions that she would take to minimize the risk of pain during the planned extraction, he has made no attempt to discover what those additional precautions might have been and whether they would have persuaded him to let her extract the tooth. And while he claims to have refused the treatment proposed by Dr. Jackson because he’d been “diagnosed” with a resistance to local anesthetics, there is no evidence of such a diagnosis.

Lake says he was sent to an outside dentist in 1999 to have a tooth pulled, after he complained that a local anesthetic administered by a dentist at the prison wasn’t making him numb. But that isn’t evidence that Dr. Jackson’s method would have been painful. Other dental work was done on Lake at the prison, including replacing fillings in his teeth on January 8, 1999, May 21, 1999, and August 20, 2004— presumably all under a local anesthetic, as that was the prison’s modus operandi. Not until 2012 was Lake again sent outside the prison for dental care, and that was because a specialist’s help was needed after the tooth extracted in the prison had shattered.

He complains that the. court should have authorized him to depose the dentist (and two assistants) who removed the decayed tooth after he finally gave permission to do so. Their testimony, Lake insists, would have established that the in-house extraction was not wholly free of pain,' thus vindicating his' belief that any in-house procedure using a local anesthetic would be painful. But what happened during a procedure conducted by a different dentist is not proof that Dr. Jackson knew that her planned method of anesthetizing Lake’s mouth would be unsuccessful or would inflict more pain than an alternative method. Dr. Jackson submitted an affidavit that was not controverted in which she testified that she believed that the anesthesia techniques that she intended to have used on Lake would have enabled her to succeed in pulling the tooth with minimal discomfort to him.

Last, Lake argues that the district court erred in rejecting his request for an order directing a third-party healthcare professional to conduct a physical examination of his teeth, which, Lake claims, would establish that he does show resistance to local anesthetics. But considering how long ago the extractions occurred and how little evidence there is that they were more than ordinarily painful (except the extraction that shattered a tooth), the probability that such an examination would have warranted a trial was slight.

Affirmed.