3:18-cv-00163
D. Nev.Jan 2, 2019Background
- ARC developed "GDiesel," a blend of compressed natural gas and diesel, and sought IRS fuel-designation registrations that affect tax credit eligibility.
- ARC previously held S, UV, and X designations; the IRS revoked ARC’s S registration in 2014, required repayment of credits, and ARC later sought an AM designation for alternative fuel.
- The IRS initially approved then later denied the AM designation after concluding GDiesel did not meet compression requirements; ARC pursued amended returns and refunds and entered Fast Track mediation.
- A Fast Track mediator recommended paying 80% of ARC’s claim; the mediator orally indicated approval, but IRS superiors later rejected the settlement and Appeals denied ARC’s claim.
- ARC sued seeking (1) refund for AM denial, (2) refund for S revocation, (3) declaratory judgment on AM status, (4) injunction to enforce the Fast Track Session Report, and (5) breach of contract for denying the settlement.
- Defendants moved to dismiss claims 3–5 for lack of subject-matter jurisdiction; the court granted dismissal with prejudice, denying leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Declaratory judgment (3rd COA): whether court may decide AM designation | APA/Declaratory Judgment Act allow review and waiver of sovereign immunity to adjudicate AM status | Tax exception to Declaratory Judgment Act and Anti‑Injunction Act bar pre‑collection review; refund suit is adequate remedy | Dismissed with prejudice: AJA/Declaratory Judgment Act preclude review; APA cannot waive immunity here |
| Injunctive relief to enforce Fast Track Session Report (4th COA): whether Session Report is reviewable final agency action | APA permits review of final agency action; Session Report was final and enforceable | Fast Track Session Report is not final or binding under Rev. Proc. 2004‑40; settlement is committed to agency discretion; thus no waiver | Dismissed with prejudice: Session Report not final; settlement decision committed to agency discretion; APA does not waive immunity |
| Breach of contract for rejecting settlement (5th COA): whether claim is cognizable in district court | Claim seeks equitable enforcement of contract (no money damages) arising from Session Report | Claim effectively seeks monetary relief; APA §702 does not waive immunity for money damages; Court of Federal Claims has exclusive jurisdiction for monetary contract claims | Dismissed with prejudice: claim seeks monetary relief (exclusive CFCl jurisdiction under Little Tucker Act); Session Report not binding so no breach |
Key Cases Cited
- United States v. Mitchell, 445 U.S. 535 (sovereign immunity limits suits against the United States)
- Enochs v. Williams Packing & Nav. Co., 370 U.S. 1 (pre‑enforcement injunction test under Anti‑Injunction Act)
- Alexander v. Americans United, Inc., 416 U.S. 752 (tax exception bars declaratory/injunctive relief; refund suit is adequate remedy)
- California by Deukmejian v. Regan, 641 F.2d 721 (Declaratory Judgment Act tax exception protects tax collection)
- Cool Fuel, Inc. v. Connett, 685 F.2d 309 (payment of tax then refund suit is adequate remedy)
- United States v. Bormes, 568 U.S. 6 (Little Tucker Act and Court of Federal Claims jurisdiction over certain money claims)