NJ Fed District Court Finds No Jurisdiction to Recognize Claim of Universal Vacatur of Notice 2007-83 for 6th Circuit Decision (4/29/23)

In OOM Inc., et al. v. United States (D. N.J. Dkt 22-2762 Opinion & Order dtd 4/24/23 Not for Publication), CL here and GS here, the court granted the Government’s Motion to dismiss the First Amended Complaint (“FAC”), here, seeking “a declaratory judgment ordering, among other things, that the reporting requirement was vacated by the Sixth Circuit [in Mann Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 2021)] and that they are entitled to rescission or refund of the assessed penalties.”

The basis for the FAC is the claim that Mann Construction was what is sometimes referred to as a universal or nationwide vacatur, vacating Notice 2007-83 upon which plaintiffs’ § 6707A penalty was based. As I have discussed before, the concept of the universal vacatur of administrative action is a hot-button issue now. Accordingly, some courts vacated administrative action take different approaches—

(i)          vacatur for the parties in the action,

(ii)        if a district court opinion, vacatur affecting all persons in the district including parties and nonparties in the case,

(iii)      if a circuit court opinion, vacatur affecting all persons in the district including parties and nonparties in the case, and

(iv)       if a district or circuit court opinion, applying nationwide, including parties and nonparties.

The OOM Inc. plaintiffs asserted that Mann Construction effected vacatur under (iv).

The problem was that penalties are treated as taxes, subject to the usual predicates applicable to tax refunds and other types of tax relief. For example, to the extent that the OOM Inc. plaintiffs were seeking a refund of the penalties, they had not met the predicates for a refund suit. To the extent that they were seeking to obliterate the unpaid assessments, they ran squarely into § 7421(a). To the extent they were seeking a declaratory judgment, they ran squarely into 28 U.S.C. § 2201(a).

Basically, as the Court said,

Plaintiffs seek a declaration stating that the vacatur in Mann has nationwide effect. Plfs. Opp. at 5. But this is not a review of agency action. In essence, Plaintiffs ask this Court to ratify the Sixth Circuit's decision in Mann. But a federal court is not an "agency." 5 U.S.C. § 551(1)(B); see also Perez v. Mortg. Bankers Ass'n, 575 U.S. 92, 95 (2015) ("The APA establishes the procedures federal administrative agencies use for `rule making."). The Court is unaware of any mechanism under the APA that would enable the Court to grant Plaintiffs' requested relief. As a result, the APA cannot serve as the basis for a waiver of sovereign immunity in this instance. Plaintiffs fail to set forth any other basis for a waiver. Accordingly, as pled Defendant is immune from Plaintiffs' claims.

 The Court gave plaintiffs "thirty (30) days to file an amended complaint that cures the deficiencies noted herein. If Plaintiffs do not file an amended pleading within that time, this matter will be closed."

JAT Comments:

1. I post this blog only to notify readers of this case. It is a “Not for Publication case,” hence of limitateed precedential value.

2. I am not sure that it is correct in the reasoning in the last indented quote.