Appeal from the Ninth Circuit Bankruptcy Appellate Panel Baum, Dunn, and Jury, Bankruptcy Judges, Presiding BAP No. 09-1040-DjuBa
The opinion of the court was delivered by: McKEOWN, Circuit Judge:
Argued and Submitted March 17, 2011-San Francisco, California
Before: Thomas M. Reavley,*fn1 M. Margaret McKeown, and Richard A. Paez, Circuit Judges.
Although the Anti-Injunction Act explicitly prohibits courts from enjoining the IRS's collection of taxes, J.J. Re-Bar Cor- poration seeks an interpretation of its Chapter 11 bankruptcy plan that would do just that. Asking us to ignore the clear policy of the Act, J.J. Re-Bar relies on the unique nature of bankruptcy proceedings to argue that its confirmed plan of reorganization unambiguously precludes the IRS from assessing a statutory tax penalty against its corporate officers. In effect, J.J. Re-Bar seeks to have the bankruptcy plan trump the Anti-Injunction Act in an effort to avoid the assessment of an otherwise uncontested tax. The Anti-Injunction Act has no such loophole or exception and we decline to create one here.
The facts in this appeal are not in dispute. J.J. Re-Bar Corporation was founded in 1974 by Joseph J. Skokan and Joanne Skokan. The Skokans and their son, Joseph M. Skokan, are J.J. Re-Bar's principal officers. From 1995 through the first quarter of 1997, J.J. Re-Bar failed to pay federal employment taxes. A large portion of the unpaid taxes were trust-fund taxes-that is, income and social security taxes that J.J. Re-Bar withheld from employee paychecks and held in trust for the government. See 26 U.S.C. §§ 3102, 3402, 7501(a).
In January 1998, J.J. Re-Bar filed a Chapter 11 petition in the United States Bankruptcy Court for the Eastern District of California. J.J. Re-Bar submitted a plan of reorganization (the "Plan") and continued to operate as a debtor-in-possession. The bankruptcy court approved J.J. Re-Bar's disclosure statements and set a deadline for any objections to the proposed Plan. The IRS did not object and the Plan was confirmed by the bankruptcy court. The IRS did not appeal from the court's confirmation order.
Important for purposes of this appeal, Article X of the confirmed Plan provided for the discharge of all debts pursuant to which J.J. Re-Bar is the "primary obligor." In its entirety, Article X states as follows:
Upon confirmation, the DEBTOR shall receive, to the fullest extent possible, any and all discharges afforded by the Bankruptcy Code. In addition, the entry of an order confirming this Plan shall constitute a release of any and all claims, causes of action, rights, disputes in existence prior to the confirmation whether known or unknown, liquidated or unliqui-dated, fixed or contingent, by any parties against the DEBTOR or claims on which the DEBTOR is the primary obligor. Such parties' sole recourse as to claims against the DEBTOR or on which the DEBTOR is the primary obligor shall be to accept the treatment given to such party under this Plan.
The Order of Confirmation shall constitute a permanent stay and permanent injunction prohibiting any action by any party against the DEBTOR, against property of the DEBTOR, or against any party based upon a claim, which existed prior to Confirmation, pursuant to which ...