Franchise Tax Board v. Usps, 467 U.S. 512 (1984)

Franchise Tax Board of California v.

United States Postal Service
No. 83-372

Argued April 17, 1984
Decided June 11, 1984
467 U.S. 512

APPEAL FROM THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

After determining that four employees of appellee United States Postal Service were delinquent in their payment of state income taxes, appellant Franchise Tax Board of California served process on appellee ordering it to withhold the delinquent amounts from the employees’ wages pursuant to a provision of the California Revenue and Taxation Code. When appellee refused to comply, appellant filed an action in Federal District Court, alleging that appellee was liable under the Code for failing to honor the orders. The District Court entered summary judgment for appellee, holding that 5 U.S.C. § 5517, which authorized the agreement that California and the United States had made regarding the withholding of state income taxes from federal employees’ pay applied only to withholding of anticipated tax liabilities, and not to delinquent liabilities. The Court of Appeals affirmed, rejecting appellant’s argument that 39 U.S.C. § 401(1), which provides that appellee may "sue and be sued in its official name," had waived any sovereign immunity that appellee might possess.

Held: When administrative process of the type employed by appellant issues against appellee, it has been "sued" within the meaning of § 401(1), and must respond to that process. Pp. 516-525.

(a) Not only must this Court liberally construe the sue-and-be-sued clause of § 401(1), but it also must presume that appellee’s liability is the same as that of any other business. FHA v. Burr, 309 U.S. 242. No showing has been made to overcome that presumption. Since an order to withhold cannot issue unless appellee owes the employee wages, appellee is nothing but a stakeholder; the order has the same effect on its ability to operate efficiently as it does that of any other employer subject to the California statute. Pp. 516-521.

(b) It would be illogical to conclude that Congress differentiated between process issued by an administrative agency such as appellant and that of a court, for even if a court issued the order to withhold, neither appellee nor its employees would be in a materially different position. In operation and effect, appellant’s orders to withhold are identical to a court judgment, since they give rise to a binding obligation to pay the assessed amounts. Neither appellee nor its employees would obtain any additional protections from a requirement that such orders be issued by a court, since the liability cannot be contested until after the tax has been paid and a refund action brought. Moreover, to construe § 401(1) to require the issuance of judicial process before appellee need honor an order to withhold would create unwarranted disruption of the State’s delinquent tax collection process, while simultaneously depriving the orders of some of their efficacy. Pp. 521-525.

698 F.2d 1029, reversed and remanded. STEVENS, J., delivered the opinion for a unanimous Court.