Enochs v. Williams Packing & Navigation Company, Inc.

PETITIONER: Enochs
RESPONDENT: Williams Packing & Navigation Company, Inc.
LOCATION: Herricks School District

DOCKET NO.: 493
DECIDED BY: Warren Court (1962)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 370 US 1 (1962)
ARGUED: Apr 18, 1962
DECIDED: May 28, 1962

Facts of the case

Question

Media for Enochs v. Williams Packing & Navigation Company, Inc.

Audio Transcription for Oral Argument - April 18, 1962 in Enochs v. Williams Packing & Navigation Company, Inc.

Earl Warren:

Number 493, J. L. Enochs, District Director of Internal Revenue, Petitioner, versus Williams Packing and Navigation Company, Incorporated.

Mr. Oberdorfer.

Louis F. Oberdorfer:

Mr. Chief Justice, and may it please the Court.

This case involves the application of Section 7421 (a) of the Internal Revenue Code which provides very simply and very sharply that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any Court.

The question precisely here is whether in the face of the statute, the District Court had jurisdiction to restrain as it did restrain the director of Internal Revenue from the collection from the taxpayer of a duly assessed social security and unemployment compensation tax, actually the tax for several years.

On account of services according to the theory of the assessment, rendered by captains and crews operating shrimp boats owned or leased by the taxpayers, that is they either own them or lease them from a related partnership and then made available by a legal relation which is in dispute to the captains and crews to operate them and fish from them in the Gulf of Mexico.

The case is here on writ of certiorari to the Court of Appeals for the Fifth Circuit.

That Court by a vote of two to one with Judge Reeves' dissenting affirmed the judgment of the District Court which had entered the injunction.

The injunction had been entered after a protracted hearing on the merits the -- the final injunction had been preceded by a preliminary injunction and a restraining order.

The issue between the director and the taxpayer arose by or initially and at the administrative level by an assessment made by the District Director through appropriate agents.

The District Director examined the taxpayer's books, had discussions with taxpayer's officers, and according to the record, investigated by interrogating captains and crews in the area.

After having made this determination that the tax was due, the taxpayer filed a claim through the administrative review process to abate the tax.

This claim for abatement was considered and the order of the -- or -- or letter of the Appellate Division refusing to abate the taxes in the record.

The order recites that the information offered by the taxpayers in support of his claim from abatement was considered and was respectfully -- the claim was respectfully denied.

Within a very short time, four or five days after receipt of the letter of determination denying the claim for abatement, the taxpayer, and this was before there had been any notice or demand which is a condition predicate to seizure and restraint, before any notice of demand, before any collection action had occurred insofar as the record shows, so far as we know, before any collection action had been attempted, the taxpayer filed a complaint for an injunction and for preliminary injunction.

The District -- the District Court granted a preliminary injunction that it was pending before the motion for restraining order, the United States attorney was authorized to go into our practice not to either agree or disagree to the entering or entry of restraining order until we could find the facts.

In any event, the Court had a preliminary injunction also without -- at that point without really hearing -- hearing any evidence or having made the -- any findings that the action of the director in making this assessment were arbitrary and capricious or otherwise susceptible to an equitable remedy.

This assessment was run -- the -- the -- the case came on for hearing and issue was joined as raised in the pleadings.

The complaint had alleged that the taxpayer would be put out of business by collection of the tax and alleged essentially that the tax was illegal because the individuals with respect to whom social security and withholding tax -- social security and unemployment compensation tax was being paid or not as a matter of law employees and the case was tried and the record shows -- the case was tried on two issues.

The -- the legal issue of whether or not as a matter of law, these employees were employees, the Government contending.

First of all, the taxpayer contending that because there was -- that because the -- the so-called employees were compensated on a share basis instead of being paid regular wages when the ship -- when the boat came in, the catch was sold and the proceeds of the catch were divided amongst the captain and the crew and the owner of the boat.

And this, according to the taxpayer, distinguished the relationship between the boat owner and the crews and captain from the relationship of employer-employee.

The Government of course contended that although the method of compensation was unique in a sense that it was traditional to this industry, it was ultimately the kind of compensation which Congress had intended, would be subject to the social security and unemployment compensation tax.

If the Court please, we're -- we're not here to -- to debate the merits of whether or not these crews and captains were or were not employees.

We are here to contend and we hope satisfy the Court that this legal issue of whether or not these particular individuals were employees or were joint venturers or were lessees, whatever, was an issue that shouldn't -- wherever it should've been tried out, should not have been tried out in an injunction proceeding.

The -- there is a procedure for the payment of a tax and a suit for refund.

This is the procedure contemplated by Congress.

There is if -- if that procedure is not available, it seems to us that it's fair to say that Congress intended that the -- the matter be disposed of administratively.

The administrative process is there, it's in the absence of a showing that it is unfair, that procedural shortcuts have been taken, that there has been discrimination.

It's the Government's position that Congress intended that the -- that matters like this be disposed off either administratively or in a suit for refund.