The opinion of the court was delivered by: Emmet G. Sullivan United States District Court Judge
Before the Court is the appeal of the appellant, 1900 M Restaurant Associates, Inc. ("1900 M Restaurant"), pursuant to 28 U.S.C. § 158(a)(1), from an order of the United States Bankruptcy Court for the District of Columbia. By an order dated January 24, 2005, the bankruptcy court granted the United States's motion for summary judgment and dismissed the action. See 1900 M Restaurant Associates, Inc. v. United States (In re 1900 M Restaurant), 319 B.R. 302 (D.D.C. 2005). This Court agrees with the legal conclusions and the result reached by the bankruptcy court. Therefore, the bankruptcy's court's Order is affirmed.
Appellant is a restaurant operating in the District of Columbia under the tradename "Rumors." On April 9, 2003, appellant filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The majority of the appellant's obligations consisted of priority tax claims owed to the District and the Internal Revenue Service ("IRS").
On January 26, 2004, appellant submitted an offer-in-compromise ("OIC") to the IRS on IRS Form 656, pursuant to 26 U.S.C. § 7122. An OIC is an offer submitted by a taxpayer to pay less than what is owed in federal taxes. On February 6, 2005, appellant's offer was returned as nonprocessable because under IRS procedures, IRS cannot accept for review any OICs from taxpayers with open, pending bankruptcy cases. Further, appellant had not filed several tax returns, the liability for which was the subject of the offer.
When appellant's offer was returned as nonprocessable, appellant filed suit in the bankruptcy court for a declaratory judgment that IRS's policy to return as nonprocessable offers submitted by taxpayers in open bankruptcy proceedings violated 11 U.S.C. § 525(a). Appellant requested the bankruptcy court to compel IRS, pursuant to 11 U.S.C. § 105, to consider appellant's OIC -- not to approve and accept the offer -- but to merely consider it.
The parties filed cross motions for summary judgment before the Bankruptcy Court of the District of Columbia. The bankruptcy court granted the government's motion, and dismissed the action. On appeal, appellant presents two issues: (1) whether the bankruptcy court erred as a matter of law in determining that 11 U.S.C. § 525(a) does not apply to the IRS when it refused to consider an OIC under 26 U.S.C. § 7122 during the pendency of a bankruptcy case; and (2) whether the bankruptcy court erred as a matter of law in determining that 11 U.S.C. § 105 is not available to compel the IRS to consider appellant's OIC.
The bankruptcy court held that § 525(a) does not apply to the IRS's refusal to consider an OIC submitted under § 7122 during the pendency of a bankruptcy case. In re 1900 M Restaurant, 319 B.R. at 305. Specifically, the court determined that a debtor's "right to submit an offer-in-compromise" is not a "license, permit, charter, or franchise" within the ordinary meanings of those words. Id. Further, the court found that it is not a grant either within any of the ordinary meanings of that word. Id.
Then the court turned to the question of whether § 105(a) provides an alternative means to compel the government to consider appellant's OIC. After examining the legislative history of § 105(a), the court held that § 105(a) is similar to the All Writs Statute, 28 U.S.C. § 1651. Id. at 306. The court concluded that to the extent that the debtor seeks to compel performance of an alleged duty, the relief the debtor seeks is in the nature of mandamus. Id. The court held that the appellant failed to meet the requirements of a writ of mandamus: (1) appellant has a clear right to relief; (2) the appellee has a clear duty to act; and (3) there is no other adequate remedy available to appellant. Id.
Focusing on the second element, the court found that the IRS had no clear duty to the appellant under § 7122 to consider and process its OIC. Id. at 307. Section 7122(a) does not command the Secretary of the IRS to consider an OIC, rather it only provides that the Secretary "may" compromise a tax liability. Id. The court held that a discretion to compromise carries with it the discretion not to exercise the discretion. Id. In short, in exercising the statutory discretion of § 7122(a), the Secretary was free to specify what types of offers will be processed. Id. at 309.
Alternatively, the court also held that mandamus is unavailable on an alternative ground. Id. at 311. Because mandamus is an extraordinary remedy that is available only if other relief is inadequate, the court concluded that mandamus is not appropriate here because the appellant already has at its disposal another way to present a payment proposal to the IRS, that is much akin to an OIC. Id. at 312. The court explained that appellant presented to the IRS a proposed plan of reorganization, and that "through this process, [appellant] has received a decision regarding the acceptability to the IRS of the treatment [appellant] proposes. Because [appellant] has already achieved a decision regarding the acceptability of the treatment his plan proposes for the IRS's claims, [it] has achieved [its] end in filing an offer-in-compromise, and mandamus is inappropriate. . . . It follows that a decision on the acceptability of [appellant's] plan achieved the end of what [appellant] desired, even though not employing the means [appellant] desired." Id.
On appeal, a summary judgment decision entered by a bankruptcy court is reviewed de novo both as to conclusions of law and findings of fact. U.S. v. Spicer, 57 F.3d 1152, 1159 (D.C. Cir. 1995). Summary judgment in bankruptcy is governed by Bankruptcy Rule 7056, which ...