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In Nicolaus v. United States (In re Nicolaus), 963 F.3d 839 (8th Cir. 2020), the Eighth Circuit reversed the bankruptcy court and district court  and held that, prior to a 2017 amendment, Rule 3007(a) provided that an objection to a proof of claim filed by the IRS could be properly served without serving it on the Attorney General and the local US Attorney. The debtor was responsible for penalties after failing to pay withholding taxes owed by his business. The debtor declared bankruptcy, and the IRS filed a proof of claim. The debtor filed an objection and mailed a copy to the IRS. Twenty-one days passed with no response, and the court sustained the objection and disallowed the claim. A year later, the IRS moved to vacate the order because the debtor did not give notice to the Attorney General or the local US Attorney. The bankruptcy court vacated its earlier order, and the district court affirmed. The Eighth Circuit reversed the lower court’s decision and remanded the case.

The Eighth Circuit first considered whether the order at issue is final and appealable. Following the rule in Ritzen Grp., Inc. v. Jackson Masonry LLC. 140 S. Ct. 582, 586 (2020), the court decided that the order is final because it definitively disposed of a discrete issue that arose when the debtor objected to the proof of claim.

Second, the Eighth Circuit decided whether the debtor had brought the United States within the bankruptcy court’s jurisdiction when he mailed the objection to the IRS. Both the United States and the lower courts urged the Eighth Circuit to impose a special requirement for claims filed by a federal agency by looking to Federal Rule of Bankruptcy 9014. Rule 9014 requires that motions in contested matters, not otherwise governed by these rules, be served in a manner consistent with Rule 7004. Fed. R. Bankr. P. 9014.  Rule 7004 states that to serve a federal agency, a summons and complaint must be mailed to the Attorney General and the process clerk for the local United States Attorney. Fed. R. Bankr. P. 7004. They argued that only by completing these requirements could the debtor have brought the United States within the bankruptcy court’s jurisdiction. The Eighth Circuit rejected that argument based on the plain language of Rule 9014. An objection is not a motion, so it is not subject to the requirements of Rule 7004, which only governs motions and only applies when there are no other rules governing the matter.

The Eighth Circuit rejected the government’s argument that an Advisory Committee note, which states that contested matters initiated by an objection could fall under Rule 9014, overcomes the plain language of Federal Rule of Bankruptcy Procedure 3007(a) because Committee notes do not have the force of law. Fed. R. Bankr. P. 3007(a) states that an objection to a claim shall be mailed to the claimant. The claimant here was the IRS which did receive a copy of the objection by mail. The Eighth Circuit determined that nothing else was required. As such, the debtor in this case fulfilled the requirements of Rule 3007(a) and did enough to bring the United States within the jurisdiction of the bankruptcy court. The Eighth Circuit noted, however, that Rule 3007(a) was amended in 2017 to require objections to a federal agency’s claim to be mailed to the Attorney General and the United States Attorney.

Co-Editors in Chief
Alexander J. Beeby, Larkin Hoffman Daly & Lindgren Ltd.
Kesha Tanabe, Tanabe Law