Dillon v. United States of America

Background

Richard and Bonnie Dillon sued the United States, Charles Rettig, L. Terra, and Jeffrey Turner. They sought an order requiring the Internal Revenue Service to accept and process an offer-in-compromise concerning their joint income-tax debts for tax years 2011 through 2017. The Dillons submitted the offer under 26 U.S.C. § 7122 and based it on potential economic hardship during retirement. They alleged that the Internal Revenue Service improperly returned the offer after determining that it was submitted solely to hinder or delay collection.

The Dillons initially identified the federal-question statute, the mandamus statute, and the Administrative Procedure Act as jurisdictional bases. In response to the motion to dismiss, they no longer relied on the general federal-question statute and agreed to dismissal of the Commissioner and the two individual officer defendants. The United States remained the only defendant relevant to the jurisdictional analysis.

Sovereign Immunity and Mandamus

The court treated the government’s motion as a facial challenge to subject-matter jurisdiction, meaning it accepted the complaint’s jurisdiction-related factual allegations as true while deciding whether those allegations established jurisdiction. Sovereign immunity generally protects the United States from suit unless Congress has clearly waived that protection.

The court held that the mandamus statute, 28 U.S.C. § 1361, does not waive the United States’ sovereign immunity. The statute gives federal courts jurisdiction over actions seeking to compel a federal officer or employee to perform a duty owed to the plaintiff, but it does not itself authorize a suit against the United States. Because the Dillons’ individual defendants were no longer part of the case, the mandamus theory could not establish jurisdiction over the United States.

Administrative Procedure Act and Tax Laws

The court explained that the Administrative Procedure Act generally waives sovereign immunity for certain non-money claims against federal agencies or federal officers. But that waiver does not apply when another statute expressly or implicitly forbids the requested relief.

The court held that the Anti-Injunction Act, 26 U.S.C. § 7421(a), barred the Dillons’ requested order. That law generally prohibits suits seeking to restrain the assessment or collection of taxes. The court reasoned that requiring the Internal Revenue Service to accept and process the offer would restrict collection activity because collection generally could not proceed while an offer was pending, during certain periods after rejection, or while an appeal was being considered.

The court also held that the Declaratory Judgment Act, 28 U.S.C. § 2201(a), barred the requested relief because it prohibits declaratory relief concerning federal taxes. Because these statutes forbade the relief sought, the Administrative Procedure Act did not waive the United States’ sovereign immunity for the Dillons’ claims.

Disposition

The court concluded that the Dillons had not identified a waiver of sovereign immunity and that subject-matter jurisdiction was therefore lacking. It did not consider the government’s alternative argument that the complaint failed to state a claim on which relief could be granted.

The order granted the defendants’ motion to dismiss and dismissed without prejudice the action for lack of subject-matter jurisdiction. The order was signed by Judge Eric C. Tostrud.