Pfizer Inc. v. United States

PFIZER INC., Plaintiff, v. UNITED STATES, Defendant.

No. 19-1803T

United States Court of Federal Claims

September 14, 2020

Claim for overpayment interest on refund of income taxes; 26 U.S.C. § 6611; genuine issue of material fact precluding summary judgment; discovery allowed; RCFC 56(d)

Robert S. Walton, Baker & McKenzie LLP, Chicago, Illinois, for plaintiff. With him on the briefs were Russell R. Young, Susan E. Ryba, and Cameron C. Reilly, Baker & McKenzie LLP, Chicago, Illinois.

Jason Bergmann, Attorney, Court of Federal Claims Section, Tax Division, United States Department of Justice, Washington, D.C., for defendant. With him on the briefs were Richard E. Zuckerman, Principal Deputy Assistant Attorney General, Tax Division, and David I. Pincus, Chief, Court of Federal Claims Section, Tax Division, United States Department of Justice, Washington, D.C.

OPINION AND ORDER

LETTOW, Senior Judge.

Underpinning this tax case is a straightforward question of fact: what happened more than ten years ago when the Treasury Department endeavored to prepare and send to Pfizer Inc. ("Pfizer") five Treasury checks of $99 million each and a sixth Treasury check of $4,528,449.05 as a refund of income taxes overpaid for the 2008 tax year. If those checks actually were prepared and sent, Pfizer reportedly did not receive them and thus did not negotiate them. After various communications between Pfizer's tax department and the Internal Revenue Service ("IRS") regarding the refund, the IRS ultimately sent Pfizer $499,528,449.05 by wire transfer on March 18, 2010, which Pfizer received in its bank account on March 19, 2010. These circumstances have prompted Pfizer's claim for overpayment interest due respecting Pfizer's tax refund for the taxable year ending December 31, 2008, which the IRS has refused to pay.

Pfizer's claim came to the court on transfer from the United States Court of Appeals for the Second Circuit. See Pfizer Inc. v. United States, 939 F.3d 173 (2d Cir. 2019). Pfizer initially filed its complaint in the United States District Court for the Southern District of New York, where the parties undertook discovery and filed potentially dispositive motions before the district court rendered a decision against Pfizer. See Pfizer Inc. v. United States, No. 16 Civ. 1870 (LGS), 2017 WL 4350581 (S.D.N.Y. June 30, 2017), vacated and transferred, Pfizer, 939 F.3d 173. Upon transfer, Pfizer filed its transfer complaint in this court on December 18, 2019. After the government filed its answer, the parties conducted no additional discovery and Pfizer promptly submitted a motion for summary judgment. See Pl.'s Mot. for Summ. J., ECF No. 12. The government responded opposing summary judgment and with a cross-motion, seeking to reopen discovery. See Def.'s Cross-Mot. and Resp. ("Def.'s Cross-Mot."), ECF No. 16. Upon completion of briefing, see Pl.'s Reply and Resp. to Cross-Mot. ("Pl.'s Reply"), ECF No. 17; Def.'s Reply, ECF No. 22, a hearing was held on August 19, 2020. The cross-motions accordingly are ready for disposition.

BACKGROUND¹

Pfizer is a calendar year taxpayer, and as such was required to file its 2008 tax return by March 15, 2009. See Pl.'s Mem. of Law in Support of the Mot. for Summ. J. ("Pl.'s Mem."), ECF No. 13, at 2-3. For the 2008 tax year, corporate taxpayers, like Pfizer, could extend their tax deadline six months by submitting IRS Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, before March 15, 2009. See id. at 3. Pfizer timely filed Form 7004 on March 3, 2009 and extended the due date of its 2008 return to September 15, 2009. See id. Pfizer timely filed its 2008 tax return on September 11, 2009, claiming a tax overpayment of $769,665,651. See id. Pfizer requested a refund of $500,000,000 and directed the IRS to credit the remaining $269,665,651 to its 2009 income tax. See id. When the IRS processed the refund, it applied $471,551 to Pfizer's 2007 income tax account, leaving a refund of $499,528,449.05. See Def.'s Cross-Mot. at 6. The IRS scheduled the refund to be processed via six Treasury checks—five totaling $99 million each and one totaling $4,528,449.05. See id.

The government contends that it processed each of the six checks on October 19, 2009 and mailed them on October 20, 2009. See Def.'s Cross-Mot. at 7-13. According to the government, IRS employees entered the six refund amounts into the Secure Payment System, a database that it shares with the Treasury Department's Financial Management Service. See id. at 8. The Treasury Department then avers that it processed and mailed the checks via first-class mail from its center in Austin, Texas. See id. at 8-13. The checks, however, were never received by Pfizer's tax department in New York. See Pl.'s Mem. at 5. Between December 2009 and February 2010, the IRS and Pfizer discussed the missing refund checks on a number of occasions. See id. at 4-5; Def.'s Cross-Mot. at 13-14. When the checks could not be located, the IRS cancelled the six refund checks on February 26, 2010. See Pl.'s Mem. at 5; Def.'s Cross-Mot. at 15. Thereafter, the IRS executed an electronic funds transfer for $499,528,449.05 on March 18, 2010, which was deposited into Pfizer's account on March 19, 2010. See Pl.'s Mem. at 5; Def.'s Cross-Mot. at 15.

Pfizer brought suit against the United States in the United States District Court for the Southern District of New York seeking interest on its delayed refund pursuant to 26 U.S.C. § 6611. Pl.'s Transfer Compl., ECF No. 6, at 6. Section 6611 provides that "[i]nterest shall be allowed and paid upon any overpayment in respect of any internal revenue tax." 26 U.S.C. § 6611(a). If the interest is refunded to the taxpayer, interest is calculated between the date of overpayment to a date determined by the Secretary, but no more than thirty days before the check is tendered to the taxpayer. See id. at 6611(b)(2). Section 6611(e) allows the government to avoid payment of interest when the overpayment "is refunded within 45 days after the last day prescribed for filing the return." Id. at 6611(e)(1).²

On July 15, 2016, the government filed a motion to dismiss for lack of subject matter jurisdiction or, alternatively, to transfer to the Court of Federal Claims, arguing that the Southern District of New York did not have jurisdiction over Pfizer's claim under 28 U.S.C. § 1346(a)(1). See Transfer Compl. at 6. The district court denied the government's motion. See id. The parties undertook discovery, and the government subsequently filed a second motion to dismiss on the ground that Pfizer's claim was filed outside the two-year statute of limitations. See id. The district court granted the government's second motion to dismiss and later denied Pfizer's motion for reconsideration. See id.

Pfizer appealed to the United States Court of Appeals for the Second Circuit on July 25, 2017. Transfer Compl. at 7. The Second Circuit held that 28 U.S.C. § 1346(a)(1) did not grant the district court jurisdiction over the claim. Pfizer, 939 F.3d at 175-79. The court of appeals noted that Section 1346(a)(1) grants district courts and the Court of Federal Claims concurrent jurisdiction over tax recovery claims for (1) an "internal-revenue tax alleged to have been erroneously or illegally assessed or collected," (2) a "penalty claimed to have been collected without authority," or (3) a "sum alleged to have been excessive or in any manner wrongfully collected under internal-revenue laws." 28 U.S.C. § 1346(a)(1); see Pfizer, 939 F.3d at 176. Absent district court jurisdiction, the Court of Federal Claims has exclusive jurisdiction over monetary claims against the United States. See 28 U.S.C. §§ 1346(a)(1), 1491(a)(1). The Second Circuit ruled that Pfizer's claim for overpayment interest did not fit within Section 1346(a)(1), and therefore the district court lacked jurisdiction. See Pfizer. 939 F.3d at 179.³ As a result, the Second Circuit vacated the district court's judgment for lack of subject matter jurisdiction and transferred the case to the Court of Federal Claims. See id.⁴

In this court, Pfizer's motion for summary judgment rests on the premise that no material facts are in dispute, that it never received a timely refund, and that overpayment interest is thus due pursuant to Section 6611. See Pl.'s Mem. The government's cross-motion seeks to open fact discovery to address Pfizer's mail handling procedures in its New York offices. See Def.'s Cross-Mot. While the case was in the Southern District of New York, the parties conducted discovery about that very issue, with the government examining Pfizer's designated corporate witness regarding "complaints relating to lost, non-received, or misplaced mail" and any investigations into the same. Id. Ex. X. The government contends that Pfizer failed to meet its obligations to designate a knowledgeable witness in accord with Rule 30(b)(6) of the Federal Rules of Civil Procedure and seeks to reopen discovery to conduct a further deposition related to lost or misplaced mail at Pfizer's New York City offices. Id. at 33-35. Upon completion of the briefing, see Pl.'s Reply; Def.'s Reply, a hearing was held on August 19, 2020. The cross-motions are now ready for disposition.

STANDARDS FOR DECISION

A. Jurisdiction

Under the Tucker Act, the Court of Federal Claims has "jurisdiction to render judgment upon any claims against the United States founded . . . upon . . . any Act of Congress." 28 U.S.C. § 1491(a)(1). While district courts have concurrent jurisdiction over some internal-revenue tax claims, see 28 U.S.C. § 1346(a), the Court of Federal Claims has exclusive jurisdiction over claims for tax overpayment interest, see Bank of America Corp., 964 F.3d at 1109; Pfizer, 939 F.3d at 178; Alexander Proudfoot, 454 F.2d at 1384 (noting that the "[tax] [c]ode deals quite differently . . . with interest payable by the [g]overnment on overpayments" than it does with...