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In a civil lawsuit, the cover sheet that accompanies the complaint usually requires to select the "Nature of Suit".

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The US Courts website provides a document called "Nature of Suit Code Descriptions" to help determine the right code for a specific civil complaint.

What would be the right case for a civil lawsuit filed against the Federal Government due to its failure to adjudicate a naturalization application within 120 days after the initial naturalization interview?

The complaint is based on 8 U.S.C. § 1447(b).

I first assumed, that the right code would be 462 - Naturalization Application.

However, the description from the Code Descriptions document above, says:

Code: 462

Title: Naturalization Application

Description: Action seeking review of denial of an application for naturalization [8 U.S.C. § 1447(b)] or alleging failure to make a determination regarding an application for naturalization [8 U.S.C. § 1421(c)].

That does not make sense... is there an error in that document? The description mentions the law section which I would like to refer to (8 U.S.C. § 1447(b)), but this law section does not deal with "denial of application", but with failure to adjudicate (i.e. make a determination regarding an application).

It is 8 U.S.C. § 1421(c) which actually deals with denial of application.

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Your surmise is correct.

But, even if you got it wrong, there would be no litigation sanction for doing so. This portion of the civil cover sheet is used solely for purposes of gathering accurate statistics about the case load of the federal courts for policy-making and budgetary purposes.

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