2010 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-3-2010

Stacie Byers v. Intuit Inc.

Precedential or Non-Precedential: Precedential

Docket No. 09-1997

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________

No. 09-1997

___________

STACIE BYERS and DEBORAH A. SELTZER, 

individually and on behalf of all others similarly situated

Appellants

v.

INTUIT, INC.; H&R BLOCK DIGITAL TAX SOLUTIONS,

LLC; and FREE FILE ALLIANCE, LLC, each individually

and on behalf of all others similarly situated;

THE INTERNAL REVENUE SERVICE

_______

Appeal from the United States District Court 

for the Eastern District of Pennsylvania

(No. 07-4753)

District Court Judge: Honorable Thomas N. O’Neill, Jr.

________
2

Argued November 9, 2009

Before: AMBRO, GARTH and ROTH, Circuit Judges

(Opinion Filed: March 3, 2010)

Thomas Martin, Esquire (Argued)

Alan M. Feldman, Esquire 

Thomas More Marrone, Esquire

Feldman, Shepherd, Wohlgelernter, Tanner, Weinstock &

Dodig

1845 Walnut Street, 25th Floor

Philadelphia, Pennsylvania 19103

Counsel for Appellants

Judith A. Hagley, Esquire (Argued)

Jonathan S. Cohen, Esquire

Gilbert S. Rothenberg, Esquire

Tax Division

Department of Justice

950 Pennsylvania Avenue, N.W.

P.O. Box 502

Washington, D.C. 20044

Counsel for Appellee Internal Revenue Service

Stephen M. Ryan, Esquire (Argued)

Jason A. Levine, Esquire

Rahul Rao, Esquire

Paul M. Thompson, Esquire
3

McDermott Will & Emery LLP

600 13th Street, N.W.

Washington, D.C. 

Counsel for Appellee Free File Alliance, LLC, et al.

Aaron B. Hewitt, Esq.

Scott A. Stempel, Esq.

Morgan Lewis & Bockius

1111 Pennsylvania Avenue, N.W.

Suite 800 North

Washington DC 20004

Jami W. McKeon, Esq.

Morgan Lewis & Bockius

One Market Street 

Spear Street Tower

San Francisco, CA 94105

Patrick A Particelli, III, Esq.

Morgan, Lewis & Bockius

1701 Market Street 

Philadelphia PA 19103

Counsel for Appellee Intuit Inc.

Laurence Z. Shiekman, Esq.

Larry R. Wood, Jr., Esq.

Pepper Hamilton

18 & Arch Streets th
4

3000 Two Logan Square

Philadelphia PA 19103

Counsel for Appellee H& R Block Digital Tax

Solutions,LLC.

___________

OPINION

___________

GARTH, Circuit Judge:

This appeal arises out of the District Court’s dismissal of

a putative class action brought by Plaintiff-Appellants Stacie

Byers and Deborah A. Seltzer against Intuit, Inc., H&R Block

Digital Tax Solutions LLC, Free File Alliance, LLC, and the

Internal Revenue Service. We will affirm. 

I.

A.

In 1998, Congress passed the Internal Revenue Service

Restructuring and Reform Act, Pub. L. No. 105-206, Title II,

112 Stat. 723 (1998) (“RRA”). The RRA states, in pertinent

part, that “[i]t is the policy of Congress that paperless filing

should be the preferred and most convenient means of filing

Federal tax and information returns,” and consequently that “it

should be the goal of the Internal Revenue Service to have at

least 80 percent of all such returns filed electronically by the
5

year 2007.” Id. at § 2001(a). 

Rather than ordering the IRS to develop its own internal

electronic filing system in order to achieve this goal, Congress

mandated that the IRS “should cooperate with and encourage the

private sector by encouraging competition to increase electronic

filing of such returns,” id., and to “establish a plan to eliminate

barriers, provide incentives, and use competitive market forces

to increase electronic filing gradually over the next 10 years....”

Id. at § 2001(b).

In response, the IRS initiated the Free File Program,

pursuant to which it entered into an agreement in October 2002

(“2002 Agreement”) with Free File Alliance, LLC (“FFA”), a

consortium of companies in the electronic tax preparation and

filing industry. The 2002 Agreement provided that the

individual companies comprising FFA would offer free

electronic filing (“e-filing”) services to at least 60% of

taxpayers, but it did not set an upper limit as to the percentage

of taxpayers who could be offered free e-filing services.

The 2002 Agreement expired after three years, and in

2005 the IRS and FFA entered into a new agreement (“2005

Agreement”) wherein they agreed to extend the provisions of the

initial agreement, subject to certain amendments. For example,

in contrast to the 2002 Agreement, the 2005 Agreement limited

the percentage of taxpayers eligible to receive free e-filing

services from FFA to the 70% of taxpaying population with the

lowest adjusted gross income. In addition, the 2005 Agreement

imposed a cap on the amount of free e-filing services available

from any individual FFA member at 50% of all taxpayers.

These provisions (referred to hereinafter as the “Ceiling
The IOAA provides: 1

(a) It is the sense of Congress that each service or

thing of value provided by an agency (except a

mixed ownership Government corporation) to a

person (except a person on official business of the

United States Government) is to be self-sustaining

to the extent possible.

(b) The head of each agency (except a mixed

ownership Government corporation) may

prescribe regulations establishing the charge for

a service or thing of value provided by the

agency. Regulations prescribed by the heads of

executive agencies are subject to policies

6

Provisions”) were inserted by the IRS in order to ensure the

continuing vitality of the Free File Program, which the IRS

feared might otherwise cause many e-filing vendors to go out of

business, thereby frustrating the program’s ultimate goals. See

Transcript of Oral Argument at 21-22, Byers v. Intuit, Inc., No.

09-1997 (3d Cir. Nov. 17, 2009).

B.

In November 2007, Stacie Byers initiated a putative class

action on behalf of U.S. taxpayers against FFA and its members

(collectively referred to hereinafter as the “FFA Members”),

alleging that in charging fees in exchange for providing e-filing

services, the FFA Members violated the Independent Offices

Appropriations Act, 31 U.S.C. § 9701 (“IOAA”). Byers 1
prescribed by the President and shall be as

uniform as practicable. Each charge shall be –

(1) fair; and

(2) based on –

(A) the costs to the

Government

(B) the value of the service

or thing to the recipient;

(C) public policy or interest

served; and

(D) other relevant facts.

(c) This section does not affect a law of the

United States –

(1) prohibiting the determination and

collection of charges and the disposition of

those charges; and 

(2) prescribing bases for determining

charges, but a charge may be redetermined

under this section consistent with the

prescribed bases. 

7

subsequently filed a first amended complaint that (1) added

named plaintiff Deborah Seltzer, (2) added the IRS as a

defendant with respect to the IOAA claim, and (3) added a claim

under Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1,

against the FFA Members, alleging that the 2005 Agreement

constituted an illegal horizontal agreement amongst the FFA
In its May 28, 2008 memorandum and order, the 2

District Court dismissed the IOAA claim only with respect to

FFA, but not with respect to the IRS, which had not yet

completed its briefing. The IOAA claim against the IRS was

subsequently dismissed in an order dated March 19, 2009.

 Byers argued before the District Court that her IOAA 3

claim should in fact be construed as a claim seeking equitable

remedies under the Administrative Procedure Act, 5 U.S.C. §

702 (“APA”). The District Court rejected that argument, stating

“I believe that Count I of the First Amended Complaint is more

naturally read as asserting a claim under the IOAA, not the

APA.” App. at 77 n.66. Nonetheless, the District Court held

that, to the extent that Byers did assert claim under the APA, “I

conclude that [Byers] cannot sue the [FFA Members] under the

APA, because they are not ‘agencies’ within the meaning of the

APA.” App. at 77. 

8

Members to restrict output, which had the effect of causing

plaintiffs and the members of the proposed class to pay

“supracompetitive prices” for e-filing and related services.

On May 28, 2008, the District Court issued a

memorandum and order dismissing the IOAA claim with

prejudice pursuant to Fed. R. Civ. P. 12(b)(6), and dismissing 2

the Sherman Act claim with leave to amend. With respect to the

IOAA claim, the District Court held that: (1) the IOAA does not

apply to the FFA Members, since it only applies to a

government agency or a private entity tasked with performing an

agency’s statutory duty; and (2) the IOAA does not provide a

private right of action.3
 For the sake of convenience, “Byers” will hereinafter 4

be used to refer collectively to named plaintiff-appellants Stacie

Byers and Deborah Seltzer, as well the putative class they

purport to represent.

9

With respect to the Sherman Act claim, the District Court

held that although the Ceiling Provisions of the 2005 Agreement

do have the effect of restricting competition between the FFA

Members in violation of the Sherman Act, the FFA Members are

entitled to conduct-based implied antitrust immunity and are

therefore shielded from antitrust liability, since their anticompetitive behavior was required by the IRS pursuant to the

2005 Agreement.

In so holding, however, the District Court noted that it

may be possible for Byers to allege facts triggering the 4

exception to conduct-based implied antitrust immunity

articulated by the Supreme Court in Otter Tail Power Co. v.

United States, 410 U.S. 366, 378-79 (1973), and thereby

reinstate the viability of Byers’ Sherman Act claim against the

FFA Members. As such, the District Court dismissed Byers’

Sherman Act claim with leave to amend.

Byers filed a second amended complaint, which

contained all of the allegations present in her first amended

complaint as well as several paragraphs intended to invoke the

Otter Tail exception mentioned by the District Court.

Nevertheless, on March 18, 2009, the District Court issued an

order dismissing Byers’ Sherman Act claim with prejudice

pursuant to Rule 12(b)(6), holding that Byers had failed to assert

sufficient allegations to invoke the Otter Tail exception, and
 The District Court had jurisdiction pursuant to: 28 5

U.S.C. §§ 1331, 1332, 1337(a), 1346(a)(2), and 1361, and 15

U.S.C. §§ 1, 15, and 26. We have appellate jurisdiction

pursuant to 28 U.S.C. § 1291.

10

therefore that her Sherman Act claim fails due to the conductbased implied antitrust immunity shielding the FFA Members.

On the following day, March 19, 2009, the District Court issued

an order dismissing Byers’ IOAA claim against the IRS for the

same reasons that it dismissed her IOAA claim against the FFA

Members.

Byers timely appealed the District Court’s dismissal of

her IOAA claims against the FFA Members and the IRS, as well

as the District Court’s dismissal of her Sherman Act claim

against the FFA Members.5

II.

“Our standard of review of the District Court’s dismissal

under Rule 12(b)(6) is plenary.” Lora-Pena v. F.B.I., 529 F.3d

503, 505 (3d Cir. 2008). We “accept all factual allegations as

true, construe the complaint in the light most favorable to the

plaintiff, and determine whether, under any reasonable reading

of the complaint, the plaintiff may be entitled to relief.”

Grammar v. John J. Kane Reg’l Ctrs.– Glen Hazel, 570 F.3d

520, 523 (3d Cir. 2009). In addition,

While a complaint attacked by a Rule 12(b)(6)

motion to dismiss does not need detailed factual

allegations, a plaintiff’s obligation to provide the

grounds of his entitlement to relief requires more
 As noted above, see supra n.3, to the extent that Byers’

6

IOAA claim against the FFA Members was asserted under the

APA, the District Court held that such a claim fails because the

APA does not apply to the FFA Members, who are not

“agencies” within the meaning of the APA. 

11

than labels and conclusions, and a formulaic

recitation of the elements of a cause of action will

not do. Factual allegations must be enough to

raise a right to relief above the speculative level.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations,

quotation marks and alterations omitted).

A. IOAA Claim

(1) IOAA Claim against FFA Members

The District Court dismissed Byers’ IOAA claim against

the FFA Members on two independent grounds, holding that: (1)

the IOAA does not apply to the FFA Members; and (2) there is

no express or implied private right of action under the IOAA.6

Because the District Court was correct in holding that the IOAA

does not apply to the FFA Members, we will affirm its dismissal

of the IOAA claim on that ground, and need not reach the issue

of whether a private right of action exists under the IOAA. 

The IOAA provides, in pertinent part, that “[t]he head of

each agency . . . may prescribe regulations establishing the

charge for a service or thing of value provided by the agency.”

31 U.S.C. §9701(b) (emphasis added). From the plain language
12

of the statute, it is evident that the IOAA applies only to entities

that are considered to be an “agency” under the statute. In Title

31 of the United States Code, the term “agency” is defined as “a

department, agency, or instrumentality of the United States

Government.” 31 U.S.C. § 101. The FFA Members, who are

wholly private entities, clearly do not fit within this definition,

and thus the IOAA is facially inapposite. 

However, Byers argues that the IOAA’s reach extends

not only to services provided directly by a government

“agency,” but also to private entities who provide services on

behalf of a government agency pursuant to an agreement with

that agency. Accordingly, Byers asserts that since the FFA

Members provided e-filing services pursuant to agreements with

the IRS—which is clearly an “agency” for IOAA purposes—the

IOAA therefore applies to the fees that the FFA Members

charged for e-filing services provided to taxpayers.

In support of her position, Byers relies primarily on

Thomas v. Network Solutions, Inc., 176 F.3d 500 (D.C. Cir.

1999). In Thomas, the D.C. Circuit held that while the IOAA

traditionally applies only to services provided directly by

government agencies, “[g]overnment agencies cannot escape

responsibility for failing to perform their statutory duties by

hiring private parties to perform those duties,” and thus, under

certain circumstances, the IOAA’s reach may be extended to

encompass private entities as well. Id. at 510. Under Thomas,

the IOAA applies to a private entity providing services pursuant

to an agreement with a government agency, but only if: (1) the

services provided by the private entity are services that the

agency is statutorily required to provide; (2) the agency

effectively controlled the private entity’s provision of the
13

services at issue; or (3) the services provided by the private

entity are “quintessential government service[s].” Id. at 510-11.

Exception (1) – Services Provided by the Private Entity are

Services that the Agency is Statutorily Required to Provide

Byers argues that since the FFA Members were tasked

with performing the IRS’s statutory duty, this case falls under

Thomas exception (1), and the IOAA therefore applies. We

cannot accept Byers’ argument since she erroneously conflates

the statutory duty delegated to the IRS—i.e., collecting and

processing tax returns—with the services provided by the FFA

Members—i.e., preparing and filing the returns.

26 U.S.C. §§ 6011 and 6091 make clear that the filing of

tax returns is the sole responsibility of the private individual or

entity who is making the filing. Moreover, while §6011(f)

provides that “[t]he Secretary is authorized to promote the

benefits of and encourage the use of electronic tax

administration programs,” nowhere does it state that the IRS is

obligated to assist taxpayers with the filing—electronic or

otherwise—of their tax returns. Rather, the text merely provides

that “a return...shall be made to the Secretary . . . .” Id. at

§6091(b)(1)(A) (emphasis added). The Secretary—and by

extension, the IRS—has no statutory duty with respect to the

preparation or filing of tax returns. Rather, the IRS’s

obligations begin only after the tax return is actually “return[ed]

. . . to the Secretary,” id., which triggers the IRS’s statutory

mandate to review the return and assess the proper taxes as

dictated by the Internal Revenue Code. Id. at §6201.

The FFA Members, in offering e-filing services to the
For example, while Article V.A. of the 2002 Agreement 7

states that “[t]he IRS will host and maintain the Web Page,”

Article V.C. of the same Agreement provides that “[t]axpayers

will be able to use [FFA Members]’ software to prepare and

electronically file their own personal income returns using

proprietary processes and systems which such Participants host

and maintain.” App. at 226. These two provisions illustrate the

co-dependent nature of the Agreements, and belie any argument

14

public, do not perform any of the tasks statutorily assigned to the

IRS, but rather serve the very same private-sector functions as

accountants (who aid with preparation of returns) and delivery

services such as Federal Express (which aid with the filing of

returns). As such, Byers has failed to state a viable IOAA claim

under Thomas exception (1).

Exception (2) – The Agency Effectively Controlled the Private

Entity’s Provision of the Services At Issue

With respect to Thomas exception (2), Byers cannot

sustain an argument that the IRS effectively controlled the

conduct of the FFA Members, since Byers herself acknowledges

that despite the FFA Members’ agreement with the IRS, they

were free to charge whatever they saw fit for their e-filing

services. See Brief for Appellants at 32. Moreover, the plain

language of the record indicates that the relationship between

the IRS and the FFA Members was cooperative and bilateral in

nature, with neither party exercising “effective control” over the

other. 

7
by Byers that, under the Agreements, the IRS effectively

controlled the FFA Members.

Since we will affirm the District Court’s dismissal on 8

this ground, we need not reach the questions of whether the

service provided by the FFA Members constitutes a “service or

thing of value” under the IOAA, or whether a private right of

action exists under the IOAA or the APA.

15

Exception (3) – The Services Provided by the Private Entity are

Quintessential Government Services 

Nor does Thomas exception (3) support Byers’ argument.

The services offered by the FFA Members—i.e., the preparation

and filing of tax returns—are activities that have always been

the province of the private sector. Indeed, rather than providing

a “quintessential government service,” the FFA Members in fact

provide a quintessentially private-sector service. Accord H.R.

Rep. No. 107-575, p. 38 (2002) (“[T]he IRS stated that it did not

intend to enter into the tax preparation software business;

instead it intended to work in partnership with [private] industry

to expand the electronic filing of tax returns . . . . The

Committee strongly believes in the [private] industry-IRS

partnership concept . . .”).

* * *

Since the IOAA is facially inapplicable to the FFA

Members, and none of the Thomas exceptions apply, the District

Court was correct in dismissing Byers’ IOAA claim against the

FFA Members pursuant to Rule 12(b)(6) on the ground that the

IOAA does not apply to those entities.8
16

(2) IOAA claim against IRS

 Byers’ IOAA claim against the IRS is identical to Byers’

claim asserted against the FFA Members. Since, as we note

above, the e-filing services at issue in this case are

quintessentially private-sector services, and the IRS is a

quintessential government agency, the IOAA does not apply to

this claim. See supra § II(A)(1). Moreover, neither are the

Thomas exceptions, discussed in that section, applicable. The

IRS did not exercise control—effective or otherwise—over the

provision of those services, and accordingly, the IOAA claim

against the IRS fails as a matter of law. The District Court did

not err in dismissing the IOAA claim against the IRS pursuant

to Fed. R. Civ. P. 12(b)(6).

B. Sherman Act claim

The District Court dismissed Byers’ Sherman Act claim

against the FFA Members pursuant to Rule 12(b)(6) on the

ground that Byers failed to assert sufficient allegations to

establish that the FFA Members are not shielded from her

Sherman Act claims under the doctrine of conduct-based

implied antitrust immunity. Byers argues that the District Court

erred in (1) holding that the FFA Members are entitled to

conduct-based implied antitrust immunity, and (2) holding that

Byers had failed to assert sufficient allegations in her second

amended complaint to invoke the Otter Tail exception.

(1) Conduct-Based Implied Antitrust Immunity

Byers submits that conduct-based implied antitrust

immunity is accorded to private parties only when the private

parties are: (1) acting at the direction of a government agency;
See, e.g., Jes Properties, Inc. v. USA Equestrian, Inc.,

9

458 F.3d 1224 (11th Cir. 2006) (antitrust immunity accorded to

private entities who, pursuant to statutory authority, engaged in

the non-governmental activity of regulating equestrian

competitions); Name.Space, Inc. v. Network Solutions, Inc., 202

17

and (2) providing a “government service.” Br. for Appellants at

44-46. Thus, argues Byers, if the District Court were indeed

correct in holding that the IOAA does not apply to the FFA

Members pursuant to Thomas because they were not providing

a “quintessential government service,” it must necessarily follow

that the FFA Members are not entitled to implied antitrust

immunity. In essence, Byers complains that the FFA Members

cannot “have their cake and eat it too”—if they lose on the

IOAA issue, they must win on the antitrust immunity issue—and

therefore cannot emerge victorious on both counts.

 Byers’ logic, however, is fatally flawed in that she fails

to cite any authority for the proposition that implied antitrust

immunity is available to private entities only when the service

being provided is “governmental” in nature. Indeed, as the FFA

Members note, “[t]he cases in this area demonstrate that [in

order to trigger implied antitrust immunity,] the specific nature

of a private entity’s conduct need not be the provision of a

‘governmental’ function, provided the conduct is directed by

a federal agency, pursuant to a defined government program or

policy.” Joint Opening Brief of Appellees Intuit, Inc., H&R

Block Tax Digital Solutions, Inc., and Free File Alliance LLC

at 46, (“Br. of FFA Members”) (second and third emphases

added). Such immunity is provided to a private party acting 9
F.3d 573 (2d Cir. 2000) (antitrust immunity accorded to private

entity that was compelled by government agency to engage in

the non-governmental service of overseeing distribution and

management of internet “domain names”); Sakamoto v. Duty

Free Shoppers, Ltd., 764 F.2d 1285 (9th Cir. 1985) (implied

antitrust immunity accorded to private entity that engaged in

non-governmental service of selling specified merchandise to

travelers at an airport); Champaign-Urbana News Agency, Inc.

v. J.L. Cummins News Co., Inc., 632 F.2d 680 (7th Cir. 1980)

(antitrust immunity accorded to distributor engaged in private

activity of selling books and magazines to the Army and Air

Force Exchange Service).

As explained above, see supra § I(A), the Ceiling 10

Provisions included in the 2005 Agreement provided that: (1)

only the 70% of the taxpaying population with the lowest

18

anti-competitively pursuant to an agreement with a government

agency when: (1) the government agency is acting pursuant to

a clearly defined policy or program; and (2) the private party is

acting at the direction or consent of the government agency.

Whether the particular activity in question is of a private or

governmental nature is immaterial to the analysis. 

It is clear that the IRS was statutorily authorized to enter

into the 2002 and 2005 Agreements pursuant to the RRA. See

RRA §2001(a) (mandating that the IRS “should cooperate with

and encourage the private sector” to increase e-filing). In

addition, the Ceiling Provisions in the 2005 Agreement

expressly directed the FFA Members to restrict the availability

of free e-filing services under the Free File Program.10
adjusted gross income was eligible to receive free e-filing

services from the FFA members; and (2) no individual FFA

member was permitted to offer free e-filing services to more

than 50% of all taxpayers.

19

Since both prongs (1) and (2) of the standard set forth

above are satisfied, we conclude that the FFA Members are

entitled to conduct-based implied antitrust immunity with

respect to the anti-competitive action taken pursuant to the

Ceiling Provisions of the 2005 Agreement. 

(2) Otter Tail Exception

The Supreme Court in Otter Tail Power Co. v. United

States, 410 U.S. 366 (1973), established an exception to the

doctrine of implied antitrust immunity. Otter Tail held that even

when the circumstances otherwise dictated that a private entity

was entitled to implied antitrust immunity, such protection

would not be accorded if: (1) the private entity had “insisted” on

anti-competitive restrictions in its contract with a government

agency; and (2) those restrictions “hindered” the government.

See 410 U.S. at 379.

Since, as we hold, see supra §II(B)(1), the FFA Members

are otherwise entitled to antitrust immunity, for Byers’ Sherman

Act claim against the FFA Members to survive, she must show

that: (1) the FFA Members “insisted” upon the anti-competitive

Ceiling Provisions present in the 2005 Agreement; and (2) that

these restrictions “hindered” the goals of the IRS’s Free File

Program.

Byers failed to include such allegations in her first
20

amended complaint, leading the District Court to dismiss her

Sherman Act claim with leave to amend, “since [Byers] may be

able to amend [her Sherman Act claim] to allege facts that cast

doubt on the [FFA Members]’ conduct-based [antitrust]

immunity.” App. at 110. 

In her second amended complaint, Byers attempted to

invoke the Otter Tail exception by including the following

paragraphs:

The IRS agreed to the restrictions on free services

only at the corporate defendants’ insistence, and

those restrictions were a hindrance to the IRS,

especially the IRS’s ability to fulfill the

President’s Management Agenda and the E Z Tax

Filing Initiative to provide free services to all

citizens and to promote electronic filing in an

effort to meet its electronic filing goals set by the

IRS Restructuring and Reform Act of 1998. 

[...] 

Thus the IRS agreed to the restrictions on free

services only at the corporate defendants’

insistence, and that those restrictions were a

hindrance to the IRS. For example, in the year

following implementation of the 2005 Agreement,

participation in the free file program decreased by

23%.

App. at 492-93 (emphases added). 

In support of these allegations, Byers appended a 2006
 “The TIGTA is an independent, third-party auditor that 11

reviews IRS programs and makes recommendations.” App. at

17.

 By law, each TIGTA report includes a section 12

containing the IRS’s response to the contents of the report. See

Inspector General Act of 1978 § 5(b), 5 U.S.C. app. 3 (2008).

21

report issued by the Treasury Inspector General for Tax

Administration (“TIGTA”) analyzing the 2005 Agreement 11

between the IRS and the FFA Members, and also included

pertinent portions of the TIGTA report in the body of her second

amended complaint. See App. at 492-93. The contents of the

appended TIGTA report support Byers’ allegations that (1) the

Ceiling Provisions were included the 2005 Agreement at the

insistence of the FFA Members, and (2) the Ceiling Provisions

had the effect of hindering the IRS’s ability to fulfill the goal of

the Free File Program to increase electronic filing. 

However, while the TIGTA report itself buttresses Byers’

Otter Tail allegations, the IRS’s “Management Response” to the

report, which was included in the 2006 TIGTA report’s 12

appendix, see App. at 605-08, directly refutes the substance of

those allegations. Although Byers did not append the IRS’s

Management Response to her second amended complaint, the

District Court was nonetheless permitted to consider its contents

in ruling on FFA Members’ motion to dismiss, notwithstanding

the general rule that a motion to dismiss for failure to state a

claim is to be evaluated only on the contents of the pleadings,

see, e.g., Mele v. Fed. Reserve Bank of New York, 359 F.3d

251, 257 (3d Cir. 2004), since: (1) Byers appended the TIGTA
22

report to her complaint and quoted at length from its contents,

and the Management Response is a statutorily required part of

the TIGTA report, see supra n.12; and (2) the FFA Members

attached the Management Response to their motion to dismiss.

See Seinfeld v. Becherer, 461 F.3d 365, 367 n.1 (3d Cir. 2006)

(citing In re Donald J. Trump Casino Sec. Litig. – Taj Mahal

Litig., 7 F.3d 357, 368 n.9 (3d Cir. 1993)). 

As noted by the District Court:

According to the management’s response to the

TIGTA report, the IRS’ intent for the initiative

was to “provid[e] a basic electronic filing option

for a limited taxpayer segment filing simple

returns,” which suggests that the IRS had a goal

of restricting the size of the population which the

FFA would service and that restrictions were not

added at [FFA Members]’ “insistence.”

Additionally, the IRS stated that it believed that

the program had “successfully fulfilled the intent

of the initiative.” This language strongly suggests

that the restriction did not “hinder” IRS policy. 

[...]

In short, according to the IRS statement in the

management report, the Free File Program

successfully met the IRS’ intended objectives....
 Indeed, the accuracy of the District Court’s reading of 13

the Management Response was verified at oral argument by the

attorney representing the IRS, who stated to the Court that the

“IRS did what it thought was best and made the policy choice to

have [an] income restriction” in the 2005 Agreement in order to

“maintain[] the viability of the [Free File] Alliance” and thereby

fulfill Congress’ directive regarding the encouragement of efiling. Transcript of Oral Argument at 21-22, Byers v. Intuit,

Inc., No. 09-1997 (3d Cir. Nov. 17, 2009).

23

App. at 17-18.13

Byers argues that since the TIGTA report and the IRS’s

Management Response “present differences of opinion

regarding whether or not changes to the 2005 Agreement

actually hindered the initial and stated goals of the IRS,” Br. for

Appellants at 50, this “creates a factual dispute regarding

whether the 2005 Agreement hindered IRS’s stated goals,”

rendering the Sherman Act claim unripe for dismissal. Id. 

We do not agree. By law, the views expressed in the

TIGTA report do not reflect official IRS policy, see Inspector

General Act of 1978 § 3(c), 5 U.S.C. app. 3 (2008), whereas the

views expressed in the Management Response do reflect the

official policy and perspective of the IRS. Id. at §5(b). As such,

the contradiction between the TIGTA report and the

Management Response does not create a factual dispute; rather,

the IRS’s official stance as articulated in the Management

Response is, under the law, the final word as to whether the

Ceiling Provisions were foisted upon the IRS at the insistence

of the FFA Members, and whether they have proved a hindrance
24

to the IRS’s institutional goals. 

Accordingly, we conclude as a matter of law

that—notwithstanding the opinions expressed in the 2006

TIGTA report—the Ceiling Provisions in the 2005 Agreement

were not included at the insistence of the FFA Members, nor did

they have the effect of hindering the goals of the Free File

Program.

Given that the TIGTA report does not represent the

official policy of the IRS, and therefore cannot be accepted as

to “insistence” and “hindrance,” all that remains in support of

Byers’ attempt to invoke the Otter Tail exception in her second

amended complaint are her unadorned allegations regarding

“insistence” and “hindrance.” While as a general rule we must

accept as true the allegations contained in a complaint attacked

by a 12(b)(6) motion to dismiss, Grammar, 570 F.3d at 523, “a

plaintiff’s obligation to state the grounds of entitlement to relief

requires more than labels and conclusions, and a formulaic

recitation of the elements of a cause of action will not do.”

Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S.

265, 286 (1986)) (quotation marks and alterations omitted). 

Here, Byers has incanted the “insistence” and

“hindrance” elements necessary to invoke the Otter Tail

exception, see App. at 492-93, but—aside from appending and

quoting a wholly refuted source—has otherwise failed to bolster

her allegations with sufficient supporting facts to satisfy the

Twombly pleading standard. See Phillips v. County of

Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (“After Twombly,

it is no longer sufficient to allege mere elements of a cause of

action; instead a complaint must allege facts suggestive of the
25

proscribed conduct.”) (quoting Twombly, 550 U.S. at 563 n.8)

(alterations and quotation marks omitted). 

Without the aid of the Otter Tail exception, Byers’

Sherman Act claim against the FFA Members is foreclosed by

the conduct-based implied antitrust immunity to which the FFA

Members are otherwise entitled. See supra § II(B)(1). The

District Court therefore did not err in dismissing the Sherman

Act claim pursuant to 12(b)(6). 

(3) Noerr-Pennington

The FFA Members argue that even if they are not

shielded from Byers’ Sherman Act claim on the basis of implied

antitrust immunity, they are still protected under the NoerrPennington doctrine, which immunizes private parties against

antitrust liability based on the petitioning of government entities,

even if there is an improperly anti-competitive motive or

purpose behind the petition. We have cogently summarized the

Noerr-Pennington doctrine as follows:

Under the Noerr- Pennington doctrine, a party

who petitions the government for redress

generally is immune from antitrust liability.

Petitioning is immune from liability even if there

is an improper purpose or motive. [...] The

immunity reaches not only to petitioning the

legislative and executive branches of government,

but the right to petition extends to all departments

of the Government, including the judiciary.

[...]

A petitioner may be immune from the antitrust
26

injuries which result from the petitioning itself.

Also, [...] parties are immune from liability

arising from the antitrust injuries caused by

government action which results from the

petitioning. Therefore, if its conduct constitutes

valid petitioning, the petitioner is immune from

antitrust liability whether or not the injuries are

caused by the act of petitioning or are caused by

government action which results from the

petitioning.

A.D. Bedell Wholesale Co., Inc. v. Philip Morris Inc., 263 F.3d

239, 250-51 (3d Cir. 2001).

The District Court held that while “[t]he negotiations that

preceded the 2005 Agreement between [the FFA Members] and

the IRS may constitute valid petitioning that ultimately requires

me to dismiss [the Sherman Act claim] under the NoerrPennington doctrine . . . I cannot consider evidence of those

negotiations at this time because such evidence is neither

mentioned in the pleadings nor [is] a matter of [public] record.”

App. at 98. 

We have explained the contours of a Noerr-Pennington

claim so that the FFA Members can be assured that we have

given recognition to their Noerr-Pennington argument.

However, given that we will affirm the District Court’s

dismissal of Byers’ Sherman Act claim, see supra § III(B)(1)-

(2), we find no need to dwell on or further address the FFA

Members’ Noerr-Pennington argument, which, even if we were

to accept it, would in any event lead to the same result that we

have already reached on other grounds.
27

III.

The District Court did not err in dismissing Byers’ IOAA

claims against the IRS and the FFA Members pursuant to

12(b)(6), nor did it err in dismissing Byers’ Sherman Act claim

against the FFA Members pursuant to 12(b)(6). Accordingly,

we will affirm the judgments of the District Court dated May 28,

2008; March 18, 2009; and March 19, 2009.