American Trust v. United States

Edgar Bradley II (defendant) was a sales agent for the American Community Mutual Insurance Company (American Community) (plaintiff). Bradley owed taxes to the Internal Revenue Service (IRS), for which the IRS placed liens on Bradley’s property. Rather than try to judicially enforce its liens, the IRS issued a notice of administrative levy to American Community demanding that American Community turn over Bradley’s property or rights to property in American Community’s possession, including commission payments due to Bradley. American Community responded by filing a state-court interpleader action. The United States (defendant) removed the suit to federal court, where the United States filed a claim pursuant to Internal Revenue Code (code) § 6321 to enforce its liens. The district court ordered the seizure of Bradley’s accumulated commissions. Bradley appealed, arguing that the district court should have reduced the United States’ judgment in accordance with code § 6334(a)(9), which prohibited the IRS from seizing a taxpayer’s entire pay via an administrative levy. Bradley acknowledged that § 6334(a)(9) typically did not apply in IRS judicial lien-enforcement proceedings. But Bradley contended that § 6334(a)(9) applied in this case because the United States initially proceeded via an administrative levy and that it would be unfair to deprive him of the benefit of § 6334(a)(9) due to a third party’s decision to bring an interpleader suit.