Court Opinion

ID: 9959530
Source: CourtListenerOpinion
Date Created: 2024-04-11 22:01:35.208778+00
Date Added: 2024-06-11T08:17:44.819402
License: Public Domain

In the
    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________

No. 23-1864
UNITED STATES OF AMERICA,
                                                 Plaintiff-Appellant,
                                 v.

BRADLEY OLSON and SHIRLEY OLSON, doing business as Af-
fordable Sewer Service,
                                   Defendants-Appellees.
                     ____________________

         Appeal from the United States District Court for the
          Northern District of Indiana, Fort Wayne Division.
         No. 1:21-CV-435-HAB — Holly A. Brady, Chief Judge.
                     ____________________

     SUBMITTED APRIL 4, 2024 — DECIDED APRIL 11, 2024
                 ____________________

    Before EASTERBROOK, ST. EVE, and JACKSON-AKIWUMI, Cir-
cuit Judges.
    PER CURIAM. For a decade Bradley Olson and Shirley Ol-
son have not paid the federal taxes of their business, Aﬀorda-
ble Sewer Service. They have deducted withholding taxes
from their employees’ wages and kept the money, not turning
it over to the IRS as federal law requires. See 26 U.S.C. §§ 3102,
3402; Begier v. IRS, 496 U.S. 53, 60–61 (1990). In many years
2                                                             No. 23-1864

they did not pay their own income tax either. The Olsons as-
sert that, if they must pay these taxes, they will go bankrupt.
(The business is a proprietorship, so personal and business
bankruptcy are the same.) They also maintain that they need
the money to support themselves and their extended family.
     The United States ﬁled this suit seeking both a money
judgment and an injunction compelling the Olsons to deposit
withholding taxes into a bank using an approved payroll ser-
vice. See 26 U.S.C. §§ 6302, 6157; 26 C.F.R. §§ 31.6302-1,
31.6302(c)-3. The proposed injunction also would require the
Olsons to pay their taxes ahead of private creditors, permit
the IRS to inspect their books and records, and notify the IRS
if they start another business.
    The district court ordered the Olsons to pay more than
$300,000. But the court denied the motion for an injunction,
relying on language in United States v. Benson, 561 F.3d 718,
724 (7th Cir. 2009). See 2023 U.S. Dist. LEXIS 8472 (N.D. Ind.
Jan. 17, 2023). The United States sought reconsideration, ob-
serving that this portion of Benson interpreted 26 U.S.C.
§7408(b), which deals with tax shelters, while the request in
this case rests on 26 U.S.C. §7402(a), which reads:
    The district courts of the United States at the instance of the
    United States shall have such jurisdiction to make and issue in
    civil actions, writs and orders of injunction, and of ne exeat repub-
    lica, orders appointing receivers, and such other orders and pro-
    cesses, and to render such judgments and decrees as may be nec-
    essary or appropriate for the enforcement of the internal revenue
    laws. The remedies hereby provided are in addition to and not
    exclusive of any and all other remedies of the United States in
    such courts or otherwise to enforce such laws.

Under this statute an injunction may issue if “necessary or ap-
propriate for the enforcement of the internal revenue laws.”
No. 23-1864                                                     3

     The district court understood §7402(a) to call for consider-
ation of the traditional factors, under which a plaintiﬀ seeking
a permanent injunction “must demonstrate: (1) that it has suf-
fered an irreparable injury; (2) that remedies available at law,
such as monetary damages, are inadequate to compensate for
that injury; (3) that, considering the balance of hardships be-
tween the plaintiﬀ and defendant, a remedy in equity is war-
ranted; and (4) that the public interest would not be disserved
by a permanent injunction.” eBay Inc. v. MercExchange, L.L.C.,
547 U.S. 388, 391 (2006). Cf. Winter v. Natural Resources Defense
Council, Inc., 555 U.S. 7, 20 (2008) (similar factors for prelimi-
nary injunction). As the district judge saw matters, the United
States has not established irreparable harm because it will not
become insolvent if the Olsons do not pay their taxes. 2023
U.S. Dist. LEXIS 40549 *7 (N.D. Ind. Mar. 9, 2023). The court
added that the United States does not face irreparable injury,
because it can get future money judgments against the Olsons
if they persist in not paying taxes.
    By the district court’s lights, no court ever would order re-
lief under §7402(a), because the national government’s sol-
vency does not depend on tax payments from any one person
or business, even the largest. Yet judges should not interpret
statutes in a way that makes them ineﬀectual. Nor should a
court be sanguine that the IRS can collect from the Olsons just
because it has a money judgment. They have not paid in the
past and assert inability to pay in the future. The sort of relief
the United States seeks in this case creates a mechanism for
payment: the use of a payroll service that will turn over with-
holding taxes (at least) whether or not the Olsons cooperate.
Ability to audit the Olsons’ books without the need for sub-
poena-enforcement proceedings also will assist in tax assess-
ment and collection.
4                                                  No. 23-1864

     Application of the traditional factors is straightforward.
(1) The United States suﬀers irreparable harm in the sense that
it is unlikely to collect future taxes unless some intermediary
such as a payroll processor superintends how the business’s
income is distributed. (2) Money damages are inadequate be-
cause the Olsons assert both inability and unwillingness to
pay. (3) The balance of hardships favors relief (the Olsons’ be-
lief that they are entitled to prefer other uses of money
amounts to little more than disagreement with the tax laws).
And (4) the public interest calls for ensuring that the Olsons
have the same costs (taxes as well as wages) as their competi-
tors. The district court’s contrary decision on these factors is
an abuse of discretion.
    The United States expresses doubt that the traditional fac-
tors apply to a statute such as §7402(a). In particular, it con-
tends, irreparable injury is unnecessary as long as the injunc-
tion is “appropriate”. The Supreme Court may decide in the
coming months whether that is true of requests for injunc-
tions under 29 U.S.C. §160(j). See Starbucks Corp. v. McKinney,
No. 23-367 (to be argued April 23, 2024). We need not await
the Court’s decision, however, because the Treasury’s injury
from a continuation of the Olsons’ conduct is irreparable. An
uncollectable money judgment is just no substitute for a pro-
cedure that facilitates compliance with the law. See Benson,
561 F.3d at 727.
   The Olsons have not appealed from the money judgment.
On the appeal by the United States, the decision is reversed
and the case is remanded for entry of the proposed injunction.