Appellate Law & Practice

CA1: First explores Gall in a GVR

US v. Taylor, No. 06-2216. ... Taylor was sentenced to one year in a halfway house, five years of probation, and a $10,000 fine, for aiding and assisting in the preparation of false tax returns, in violation of 26 U.S.C. § 7206(2)” The government appealed.  The First remanded, but the Supreme Court, post-Gall remanded again.  The First now explains Gall as follows, “makes clear that in the post-Booker world, district judges are empowered with considerable discretion in sentencing, as long as the sentence is generally reasonable and the court has followed the proper procedures.... [and a] ‘need for an increased degree of justification commensurate with an increased degree of variance.’” Therefore, seeing that the First didn’t think that the District Court explained its reasoning, “we think it best to remand to the district court for reconsideration with the benefit of all of these developments, as well as the concerns we expressed in our prior opinion.”  Earlier case here and our coverage here.

CA1: Tax Court stipulations are like contracts and are interpreted under Federal Common law

Nault v. US, No. 07-1455 affirms the decision of District Court which essentially interpreted stipulated decisions by the Tax Court in litigation involving a partnership which this plaintiff was involved in.  The plaintiff filed amended returns and essentially claimed that he was entitled to “ordinary loss deduction for the taxable basis that was ‘restored’ [by the conclusion of the tax court litigation] to his then-worthless partnership interests.”  The claims were denied and he brought suit for a refund.  This would be an interesting tax discussion, but the First sees it purely as a matter of interpretation of the Tax Court’s decision.  Again, this plaintiff was not the Tax Matters Partner, so he wasn’t really in the drivers seat in the Tax Court litigation.

The First says that the stipulations are governed by contract principles, and the court applies whatever the federal common law of contracts is.  The First looks at the stipulations and concludes that they are not ambagious, and concludes that the Tax Court parties had stipulated that some transactions lacked economic substance.  Moreover, since these stipulations are like contracts (while they are interpreted as contracts, I am not sure that they really *are* contracts), the First says that only in extreme cases should the District Court consider extrinsic evidence.

CA1: Breaking news. First Affirms “Survivor” conviction

US v. Hatch, No. 06-1902.  Okay, this is the appeal of that guy that won “Survivor” and didn’t pay taxes on his winnings.  He was convicted of three counts of filing false tax returns, in violation of 26 U.S.C. §§ 7201 and 7206(1).  He signed a contract which said that he would pay all taxes on his winning in this stupid show.  He later made some other money by appearing on some pilots of even stupider TV shows. 

Anyway, stepping back from the stupidity of popular culture, let’s take a look at the live issues.

He wanted to argue that the procedures of the show were cheating and feeding the contestants.  The producers, he claims, in exchange for his silence on the issue, promised to pay his taxes and therefore under Cheek v. United States, 498 U.S. 192 (1991) he wasn’t willfully failing to pay his taxes.  But, nobody actually testified to such a promise, and it doesn’t seem like he was actually prevented from offering such testimony, though the actual rulings that the District Court made in the heat of the trial seemed to come fast and furious during direct, so maybe someone misunderstand what doors were open to what testimony.

The First also says that the “expert” testimony of IRS agents was error.  But the First says that they were really “fact” witnesses.  The First says that objections were either waived or not plain error. 

The District Court has precluded certain testimony from the defendant’s accountant, but these seem to be on relevance grounds. 

On the other side, he argued that the District Court improperly imposed limits on his cross.  The First bashes counsel by saying that some of the proposed questions were “incoherent.”  The First also says that his cross-examination just wasn’t restricted. 

And, for all the sentencing buffs out there: a perjury enhancement was proper, even though he was acquitted of a perjury count.  The First says the issue (like the amount of loss) isn’t developed.

CA11: government wins Snipes motions

Just in case you 1) care; and 2) don’t know, the 11^th Circuit rejected all of Wesley Snipes’ pretrial motions (e.g. for a change of venue), on a motion from the government to dismiss as an “impermissible interlocutory appeal.”

CA9: Expert witness on mens rea of tax protester (and contempt)

The Ninth Circuit blog points to United States v. Lawrence Cohen, __ F.3d __, 2007 WL 4485629 (9th Cir. Dec. 26, 2007).  The defendant is one of those “crazy” tax protesters.  Now, most of us refer to tax protesters as “crazy” in the sense that “they behave in a way that nobody I want to associate with behaves, and they have ideas that are so far outside my reality that I don’t take them seriously.”  But, this guy is different.  His lawyers actually think that he is crazy.  A shrink writes a report which reads ““[h]is behavior is driven by a mental disorder as  opposed to criminal motivation . . . Although it is true Mr. Cohen was not delusional or psychotic and was in possession of basic mental faculties, his will was in the service of irrational beliefs as a result of narcissistic personality disorder.”  The Ninth says that this testimony could have helped the trier of fact, because the expert was proposing to testify that “...once Cohen adopted [Irwin] Schiff’s views, Cohen would not change his mind.... [and] a narcissistic personality disorder like Cohen’s can cause a person to continue to believe something to be true despite overwhelming evidence of its patent absurdity.”  The Ninth expresses some hesitation about allowing in all of the proposed testimony, because some of it might really be invading the province of the jury to determine mens rea, but it says that weeding that stuff out is for the District Court. 

Anyway, the guy did lots of things to annoy the District Judge.  He was held in contempt (fifteen times), but the judge “failed to file contempt orders as required by Federal Rule of Criminal Procedure 42(b).”  The Ninth says the remedy for this is to remand, but “On remand, the district court may reinstate the contempt convictions and resentence him so long as it does not increase the individual punishments for any of the fifteen convictions.”  It also mentions a mathematical error. The Ninth says, however, that the District Court’s procedure (of doubling the sanction for each time he did something contemptuous) doesn’t raise due process problems, because it happened immediately after the offense occurred, and sentencing him post-trial for some of the contempts does not run afoul of Taylor v. Hayes, 418 US 488 (1974).  Each sentence was less than six months, so there was no jury-trial problem.

The post ends with this: 

Cohen has sparked much interest among bloggers. For a taste of a law prof's sour grapes (he was on the government's early briefing), see Brian Galle's comments here. More mens rea analysis (and some interesting gossip on other details of the case) can be found here. 

CA1: is there any procedural justice in CDP hearings?

Drake v. CIR, No. 06-2507.  Oh good.  A Tax case.  The earlier proceedings were important to tax practitioners because they involved the extent to which Appeals Officers could engage in ex parte contacts with other parts of the service.  There was a remand by the Tax Court to the IRS.  He attempts to raise these issues again, but the First says that the remand purged the taint.

Starting with the worst part of the opinion: The First holds, without any real analysis that “the circuits that have all agree that a prevailing party must prevail in the final outcome of the case.”  Therefore, he doesn’t get attorneys fees.  Pathetically the First cites three cases.  One isn’t even under the Internal Revenue Code (which has its own fee-shifting provision), and the two are not directly on point with the petitioner’s argument – that he was entitled to fees for the initial tainted proceedings that the IRS botched. Instead, they deal fee issues relating to whether someone “substantially prevailed.”  I don’t know why the First dropped the ball on this.

You should like totally read on.

CA1: If the government backs down on a tax lien, the matter is moot

Johansen v. US, No. 06-2037 (10/29/07).  After a couple divorced, the government asserted a tax lien on the wife’s house based on the government’s tax liabilities.  The wife went to court to quiet title.  The government counterclaimed to foreclose the property.  Then the ex-husband paid the tax liability.

Once the government got its money, it filed documents saying that the case was moot, and it no longer sought to foreclose, and was no longer asserting the lien.  The plaintiff argues that this whole thing had hurt her creditworthiness, and she could still obtain attorneys fees under the Internal Revenue Code, 26 U.S.C. § 7430, and the Equal Access to Justice Act, 28 U.S.C. § 2412(d). 

The government argues that the plaintiff was suing under a waiver of sovereign immunity to “quiet title” and therefore does not have a free-standing cause of action for money damages.  The First says that because the equitable relief that she sought is no longer sought, then she can’t get money damages because the matter is moot under Lewis v. Continental Bank Corporation, 494 U.S. 472, 477 (1990) (“conclusive character” defines mootness.)   

Read, or something.

Tax Court on work product protection for IRS attorneys in sanctoins and attorneys fees context

TaxProfBlog and Bryan Camp (Texas Tech) point to Ratke v. Commissioner, 129 T.C. No. 6 (9/5/07).  This case seems to hold that in the context of a “dispute over attorneys fees and possible sanctions against the IRS trial attorney” the best a taxpayer can do is get in camera review of a “trial memo” (sent by the attorneys to DC).  I am not sure where I need to put this into my “brain file.”

Tax Court sex change trial gets publicity

It is rare that Tax Court trials get publicity.  But, since this one involves a sex change operation (and whether it is deductible as medical treatment) this one is the exception.  And wouldn’t you know it, the service uses the expert that f***ed up the Andrea Yates trial, and even a Texas appellate court had to reverse it.

Dietz acknowledged Thursday that he had made a mistake, but said his testimony was "erroneous, not knowingly false."

Good thing he straightened that out.  Tnx TaxProfBlog.

CA1: big decision on sentencing review (and good works of defendant)

US v. Taylor, No. 06-2216 (8/16/07). I hereby apologize to my audience for not getting to this case within minutes after it came out, as I usually do that. I was seduced by the lure of a rehearing issue, as I thought it was really important. This is more important. Unfortunately, the First, as usual, defers to the government on what constitutes a “reasonable” sentence, in an “aiding and assisting in the preparation of false tax returns, a violation of 26 U.S.C. § 7206(2).” The District Court handed down a non-jail sentence. The First wants the taxpayers to pay to keep this part-time high school music teacher, part-time tax preparer in jail. Isn’t that ironic?

The defendant presented letters stating that he could continue as a teacher, 48 prominent people saying that he walked on water.  

Despite the result, the First does go about part of this somewhat intelligently. It splits with the Seventh and Ninth circuits, about whether Courts of Appeal should “engage in an independent review of whether a district court properly interpreted the Sentencing Commission's policy statements in determining a sentence.” The Seventh and Ninth say no. The First says yes. After that, the First holds, the review is for reasonableness.

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