Unpublished Disposition, 852 F.2d 571 (9th Cir. 1988)

MEMORANDUM^** 

Robert and Suzanne Clark appeal the district court's denial of their motion for a preliminary injunction prohibiting the government from collecting an assessment of federal income taxes. We affirm.

The Clarks claimed that certain income tax deficiencies for the year 1977 had been assessed after the expiration of the statute of limitations. They sought a preliminary injunction on the ground that they would not be able to obtain a refund if the assessment ultimately was held to be time barred.

Subject to certain statutory exceptions not relevant here, the Anti-Injunction Act prohibits taxpayers from maintaining any "suit for the purpose of restraining the assessment or collection of any tax." 26 U.S.C. § 7421(a) (1982). We review de novo the district court's decision to dismiss the Clarks' action pursuant to Sec. 7421(a). See McIntyre v. United States, 789 F.2d 1408, 1410 (9th Cir. 1986).

In Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 5-8 (1962), the Supreme Court held that courts may in rare instances enjoin the collection of federal tax assessments notwithstanding the Anti-Injunction Act. A taxpayer may obtain an injunction, however, only by demonstrating that legal remedies are inadequate, that collection would cause irreparable injury, and that the government has almost no chance of prevailing on the merits. See id. at 7-8; Cool Fuel, Inc. v. Connett, 685 F.2d 309, 313 (9th Cir. 1982) (finding that traditional equitable principles still apply despite the Anti-Injunction Act and that taxpayers therefore must "show irreparable injury and lack of an adequate legal remedy").

The Clarks have failed to demonstrate that they lack an adequate remedy at law. They may sue for a refund if the government has money it is not entitled to keep. See Cool Fuel, Inc., 685 F.2d at 314 (observing that "it has been established law that payment of the tax followed by a suit for refund constitutes an adequate remedy at law").

The assessments contested by the Clarks may be of a kind that has been statutorily defined as "overpayments." See 26 U.S.C. § 6401(a) (1982) (stating that " [t]he term 'overpayment' includes that part of the amount of the payment of any internal revenue tax which is assessed or collected after the expiration of the period of limitation properly applicable thereto"). Under 26 U.S.C. § 6402(a) (1982 and Supp. III 1985), the Secretary "may credit the amount of such overpayment ... against any liability in respect of an internal revenue tax ... and shall ... refund any balance" to the taxpayer." Because payment of a tax barred by the statute of limitations constitutes overpayment, the Clarks may sue for a refund. They therefore have an adequate remedy at law.

The Clarks argue in effect that they may not prevail in a refund suit and that they therefore do not have an adequate remedy at law. However, the absence of a guarantee that a lawsuit will be successful has not been considered relevant in determining whether an injunction will lie. None of the cases cited by the Clarks support their claim.

Lewis v. Reynolds, 284 U.S. 281 (1932), relied upon almost exclusively by the Clarks in support of their claim that they have no adequate remedy at law, is inapplicable here. Lewis, observing that " [a]n overpayment must appear before refund is authorized," found only that:

"Although the statute of limitations may have barred the assessment and collection of any additional sum, it does not obliterate the right of the United States to retain payments already received when they do not exceed the amount which might have been properly assessed and demanded.

Id. at 283. Because the Clarks do not claim that the government will use the assessment to offset other taxes "which might have been properly assessed and demanded," id., Lewis would not affect the Clarks' right to seek a refund of the assessment paid.

Because the Clarks have an adequate remedy at law they may not sue for an injunction. We need not reach the question whether injunctive relief would have been inappropriate on other grounds. The decision of the district court denying an injunction is AFFIRMED.