BARRY, et al v. USA
Filing
47
PUBLISHED OPINION. Plaintiffs' motion for reconsideration dated 08/09/2011 is denied. The Clerk is directed to enter judgment for defendant. Signed by Senior Judge Eric G. Bruggink. (tt1) Copy to parties.
In the United States Court of Federal Claims
No. 03-200T
(Filed: February 15, 2012)
**********************
IRA H. BARRY, ET AL.,
Plaintiffs,
v.
THE UNITED STATES,
Tax Equity and Fiscal
Responsibility Act (TEFRA);
AMCOR; refund suit; Prati;
I.R.C. § 6229; I.R.C. § 6621;
Motion for Reconsideration
Defendant,
**********************
Thomas E. Redding, Houston, TX, for plaintiffs.
Paul G. Galindo, United States Department of Justice, Tax Division,
Court of Federal Claims section, Washington, D.C., with whom were John A.
DiCicco, Principal Deputy Assistant Attorney General, and Mary M. Abate,
Acting Chief, Court of Federal Claims section for defendant.
____________________
OPINION AND ORDER
____________________
BRUGGINK, Judge.
This action is one of a number of related proceedings brought pursuant
to the Tax Equity and Fiscal Responsibility Act of 1982, 26 U.S.C. §§
6221–6234 (2006) (“TEFRA”), by investors in a series of limited partnerships
organized by American Agri-Corp., Inc. (“AMCOR”). These actions are
brought by individual investing partners who are challenging assessments by
the IRS flowing from an adjustment at the partnership level. The AMCOR
partners assert three common claims for refund: (1) that the tax assessments
were untimely due to the passage of the limitations period, (2) that taxmotivated interest penalties were improper, (3) and that interest should have
been abated. These common claims were decided by representative cases,
which were eventually dismissed for lack of jurisdiction. A dismissal order
was entered in this case, but plaintiffs later asserted that they alleged facts
different from the common claims, and thus complete dismissal was
inappropriate. Accordingly, this court vacated the dismissal in this case in
part, allowing plaintiffs to pursue unique claims not addressed by the AMCOR
representative cases.
Before the court is plaintiffs’ motion for reconsideration of two interim
orders entered in this docket. The first order, dated April 18, 2008, dismissed
the common AMCOR claims. The second order, dated March 29, 2011,
confirmed the dismissal of the common AMCOR claims, but vacated the first
order in part to allow plaintiffs to pursue only their unique individual claims.
The case thus remains pending, and the motion is therefore brought under Rule
54(b) of the Rules of the United States Court of Federal Claims (“RCFC”),
which deals with reconsideration of interim orders.
Plaintiffs contend that the orders, insofar as they call for dismissal of
the common claims, are incorrect and can and should be reconsidered on the
merits. Defendant contends that the first order, which was appealed to the
Federal Circuit and affirmed, was not vacated with respect to dismissing the
common claims. The rulings on the common claims, it contends, are therefore
not open to review. Defendant further argues that plaintiffs have not met their
burden to demonstrate that reconsideration is warranted. The matter is fully
briefed and oral argument is deemed unnecessary. For the reasons explained
below, we deny plaintiffs’ motion for reconsideration.
BACKGROUND 1
In the 1980s, AMCOR, acting as general partner, organized a series of
limited partnerships to serve as investment vehicles marketed to high-income
professionals. The announced goal of these partnerships was to buy farmland
and grow crops. AMCOR raised $206 million dollars from 3,000 investors.
Due to the structure of the partnerships, the front-loading of expenses, and
corresponding deductions, investors were saving as much in taxes as they were
investing, and sometimes even more. By the late 1980s, however, the
1
The following facts are derived from Prati v. United States, 81 Fed.
Cl. 422 (2008), and Prati v. United States, 603 F.3d 1301 (Fed. Cir. 2010), and
are common to all AMCOR partners unless otherwise noted.
2
AMCOR partnerships were the target of an IRS audit and investigation. The
IRS believed that the AMCOR partnerships were illegal tax shelters.
The IRS examined the AMCOR partnerships and issued a final
partnership administrative adjustment (“FPAA”) to the tax matters partner of
the AMCOR partnerships, adjusting the partnerships’ deductions.
Representatives of the AMCOR partnerships challenged the FPAAs in
partnership-level proceedings before the United States Tax Court. One of the
issues in that partnership-level proceeding was whether the adjustments were
untimely based on the statute of limitations created by I.R.C. § 6229.2 The
AMCOR tax matters partner in the Tax Court proceeding executed a
“Stipulation to be Bound,” in which the AMCOR partnerships agreed to be
bound consistent with the Tax Court’s findings of fact and law relating to the
statute of limitations issue in an AMCOR test case. In that test case, Agri-Cal
Venture Associates v. Commissioner, 80 T.C.M. (CCH) 295 (2000), the Tax
Court rejected the statute of limitations defense.
While the partnership-level proceedings were pending at the Tax Court,
some AMCOR partners, including plaintiffs in this case, chose to settle their
partnership items with the IRS. The settlement was effectuated in 1999 by
execution of Form 870-P(AD). The partners who settled at this stage in the
AMCOR litigation were known as “settled partners.” Other AMCOR partners
did not settle with the IRS and were referred to as “non-settling partners.”
In 2001, the IRS moved under Tax Court Rule 248(b)3 for entry of
decision in the non-settled partnership cases. The IRS represented that it and
the tax matters partner for the AMCOR partnerships had reached a contingent
agreement with respect to the disputed partnership items. Accordingly, the
Tax Court entered stipulated decisions on July 19, 2001.
The IRS subsequently assessed additional interest against settling and
non-settling partners under I.R.C. § 6621(c), which, at that time, provided for
a special interest penalty for substantial underpayments of income tax
2
All I.R.C. references are to the Internal Revenue Code of 1986, as
amended, contained within Title 26 of the United States Code, unless
otherwise noted.
3
Tax Court Rule 248(b) allows the IRS to move for judgment based on
a settlement or consistent agreement entered into with the tax matters partner.
3
attributable to tax motivated transactions. AMCOR partners then filed
administrative refund claims with the IRS, which were denied. Thereafter,
many individual AMCOR partners filed tax refund suits in this court. In total,
129 AMCOR-partnership refund suits were filed here; 77 of those cases,
including the instant case, were deemed by the parties to be legally and
factually similar.
On March 28, 2003, the parties filed a joint motion to stay the instant
case. The joint motion noted that, because the instant case “presents the same
issues of fact and law as the [other AMCOR cases], the parties request that
proceedings be suspended pending a final decision in the representative cases.”
Joint Mot. to Stay 3-4. Judge Yock, to whom the case was then assigned,
granted the motion to stay and observed that, “The parties have selected three
representative cases in which proceedings will go forward: [Isler v. United
States, No. 01-344]; [Scuteri v. United States, No. 01-358]; and [Prati v.
United States, No. 02-60].” Barry v. United States, No. 03-200 (Fed. Cl. Apr.
2, 2003) (order granting stay).
The parties later added additional
representative cases: Hinck v. United States, No. 03-865, Keener v. United
States, No. 03-2028, and Smith v. United States, No. 04-907.
In February 2005, Judge Allegra, to whom AMCOR cases had also
been assigned, decided Hinck v. United States, 64 Fed. Cl. 71 (2005). In
Hinck, Judge Allegra held that we lack jurisdiction to consider plaintiffs’
interest abatement claims under I.R.C. § 6404 because such authority rests
within the discretion of the Secretary and is not subject to judicial review in
this court. Id. at 84. The AMCOR plaintiffs appealed to the Federal Circuit,
which affirmed, holding that the Tax Court is the exclusive forum for interest
abatement claims under I.R.C. § 6404. 446 F.3d 1370 (Fed. Cir. 2006). The
Supreme Court granted certiorari, 549 U.S. 1162, and affirmed the Federal
Circuit. 550 U.S. 501 (2007). Thus, after Hinck, the remaining common
AMCOR claims related to untimely assessment under I.R.C. § 6229(a) and
tax-motivated interest under I.R.C. § 6621(c).
On April 20, 2006, the instant case was reassigned to Judge Block, and
it remained stayed pending the outcome in the remaining representative cases.
Meanwhile, Judge Allegra decided Keener v. United States, 76 Fed. Cl. 455
(2007). In Keener, Judge Allegra held that we lack tax refund jurisdiction over
AMCOR plaintiffs’ statute of limitations and tax-motivated interest claims
because such claims were partnership-level items and, as such, needed to be
addressed in the partnership-level proceeding. See id. at 470.
4
On April 16, 2008, Judge Block decided Prati v. United States (Prati
I), 81 Fed. Cl. 422 (2008). He held that this courts lacks jurisdiction to hear
AMCOR plaintiffs’ I.R.C. § 6229(a) limitations claims and I.R.C. § 6621(c)
tax-motivated interest claims because both were partnership-level items that,
under TEFRA, needed to be challenged at the partnership-level proceeding,
which, in this case, was at the Tax Court. See id. at 436. Additionally, relying
on Hinck, Judge Block also dismissed plaintiffs’ interest abatement claims
under I.R.C. § 6404. Id. at 440. Thus, Prati I foreclosed the I.R.C. §§ 6229(a)
and 6621(c) claims, which were the only common AMCOR claims remaining.
The net effect, therefore, of Hinck and Prati I was to dismiss the common
AMCOR claims in their entirety. On April 18, 2008, Judge Block entered
judgment under RCFC 58 dismissing all remaining claims for lack of
jurisdiction, including those of the plaintiffs here.
On May 2, 2008, plaintiffs here filed a motion for reconsideration and
to alter or amend the judgment dismissing their case. Plaintiffs argued that,
although Prati I dismissed the I.R.C. §§ 6229 and 6621 claims, complete
dismissal was not appropriate because some of the AMCOR plaintiffs,
including certain plaintiffs in this case, asserted a cause of action not covered
by the Prati I opinion. Pls.’ Mot. Vacate 1, ECF No. 24. For example, the
Boggs, plaintiffs in the instant case, asserted that the one-year limitations
period of I.R.C. § 6226(f) barred the assessment. Plaintiffs’ counsel requested
that the judgment be vacated and either stayed pending the Prati appeal, or that
plaintiffs be allowed to pursue their action not subject to the holding of Prati.
Plaintiffs’ counsel requested, and Judge Block granted, that the motion be
deemed filed in all of Judge Block’s AMCOR cases.
On July 1, 2008, Judge Block vacated the April 18, 2008 order in Prati
I. Prati v. United States (Prati II), 82 Fed. Cl. 373 (2008). In Prati II, Judge
Block held that “The Motion for Reconsideration is DENIED in each of the 77
cases covered by the [Prati I] opinion[,]” i.e., relating to the I.R.C. §§ 6229
and 6621 claims. Id. at 379. Judge Block did vacate judgment, however, “for
the limited purpose of allowing plaintiffs to pursue any unresolved, casespecific claims that may still be outstanding” in fifteen of the cases, including
the present one. Id. at 379. On November 21, 2008, upon a joint request by
plaintiffs’ counsel and defendant, Judge Block issued an order in Isler staying
the instant case pending appeals in Keener v. United States, 76 Fed. Cl. 455
(2009), and Prati. Isler v. United States, No. 01-344 (Fed. Cl. Nov. 21, 2008)
(order granting stay).
5
On January 8, 2009, the Federal Circuit issued its decision in Keener v.
United States, 551 F.3d 1358 (Fed. Cir. 2009), and affirmed this court’s
holding that it lacked jurisdiction over AMCOR plaintiffs’ I.R.C. §§ 6229(a)
and 6621(c) claims. Rehearing en banc was denied on March 18, 2009. The
Supreme Court denied certiorari in Keener on October 5, 2009. 130 S. Ct.
153 (2009). On May 5, 2010, the Federal Circuit issued its opinion in Prati,
affirming Judge Block’s dismissal of the I.R.C. §§ 6229(a) and 6621(c) claims.
Prati v. United States (Prati III), 603 F.3d 1301 (Fed. Cir. 2010). Rehearing
en banc was denied on August 3, 2010. The Supreme court denied certiorari
in Prati III on January 10, 2011. 131 S. Ct. 940 (2011).
On January 31, 2011, the parties in Isler filed a status report proposing
how the remaining AMCOR cases, including this one, should proceed.
Plaintiffs’ counsel requested that the instant case and other AMCOR cases be
transferred to Judge Lettow for consolidation with Epps v. United States, No.
06-615. Alternatively, plaintiffs’ counsel requested that the cases be
consolidated with Isler. Defendant requested that the cases proceed
independently of each other for the sole purpose of resolving the case-specific
claims.
On March 29, 2011, Judge Block denied all of the motions to transfer.
He noted that fourteen cases, including the instant one, were originally
dismissed for lack of jurisdiction by Prati I. Isler, No. 01-344 (Fed. Cl. Mar.
29, 2011) (order denying transfer). Moreover, Prati II vacated judgment in
certain cases covered by Prati I, but only to the extent of permitting plaintiffs
to “pursue unresolved, case-specific claims that may still be outstanding.” Id.
at 2. The order plainly did not resurrect the common refund claims that were
dismissed by Prati I: “In further proceedings before this court . . . plaintiffs
may not relitigate claims that were fully adjudicated more than three years ago
and were dismissed by the court for lack of jurisdiction.” Id. Because the
common claims had already been adjudicated and only taxpayer-specific
claims remained, Judge Block denied the request for consolidation and
transfer. He therefore lifted the stay of litigation in the individual cases and
ordered the parties to file separate joint status reports in each case setting forth
proposed procedural courses to resolve any outstanding taxpayer-specific
claims. Id. at 3-4.
On March 31, 2011, this case was transferred to the undersigned. The
parties filed a joint status report on May 24, 2011, stating that “the only claim
remaining unresolved is the backdated assessment claim pleaded in paragraph
6
24.a of plaintiffs’ complaint.” Joint Status Report 2, ECF No. 35. The claim
in paragraph 24.a relates to the one-year statute of limitations claim made by
the Boggs. Plaintiffs’ counsel further stated, however, “the Boggs no longer
wish to pursue and intend to dismiss this claim. Once that is done, there will
be no unresolved claims in this case.” Id. The joint status report also indicated
that plaintiffs’ counsel intended to move yet again for reconsideration of the
April 18, 2008 Order and Opinion (Prati I) and would move for
reconsideration of Judge Block’s March 29, 2011 order. That motion is before
the court now and the matter is ready for disposition.
DISCUSSION 4
Because a final judgment has not been entered against all plaintiffs with
respect to all issues, this motion is interlocutory in nature and thus governed
by RCFC 54(b). We possess the inherent power to modify our interlocutory
orders, and, under common law principles, we may reconsider a prior decision,
subject to the law of the case doctrine. See Wolfchild v. United States, 68 Fed.
Cl. 779, 784-85 (2005). We may depart from the law of the case, however,
upon, inter alia, the discovery of new evidence, intervening changes of legal
authority, or to prevent manifest injustice.
See id.
Interlocutory
reconsideration is thus warranted “as justice requires.” See L-3 Commc’ns
Integrated Sys., L.P. v. United States, 98 Fed. Cl. 45, 48 (2011). Although the
contours of interim reconsideration are imprecise, there remains a “a good deal
of space for the court’s discretion.” Cobell v. Norton, 224 F.R.D. 266, 272
(D.D.C. 2004).
Plaintiffs’ motion for reconsideration asserts three broad points of error:
(1) vacating the April 18, 2008 judgment reinstated plaintiffs’ limitations and
penalty interest claims (the I.R.C. §§ 6229(a) and 6621(c) claims); (2) even if
those claims have been dismissed, Prati I is not the law of the case here; and
(3) even if the common claims have been dismissed and Prati I remains the
law of the case, Prati I was wrongly decided. We hold that plaintiffs’ untimely
4
Plaintiffs’ counsel has filed similar motions for reconsideration in
other AMCOR cases: Corkill v. United States, No. 07-147; Fournier v. United
States, No. 06-933; Northcutt v. United States, No. 06-860; Boland v. United
States, No. 06-859; Donaldson v. United States, No. 03-2875; Martin v. United
States, No. 03-2272. All the motions for reconsideration have been denied.
See infra note 5.
7
assessment and tax-motivated interest claims were clearly dismissed and not
reinstated, the Prati decisions control, and reconsideration of Prati I is not
appropriate.
I.
Plaintiffs’ untimely assessment and tax-motivated interest claims were
not reinstated, and are otherwise controlled by Prati I, II, and III
Plaintiffs ask this court to decide whether the common AMCOR claims
were reinstated when Judge Block vacated his April 18, 2008 dismissal order
in part. The April 18, 2008 order stemmed from his April 16, 2008 opinion in
Prati I. Plaintiffs contended that the instant case was never formally
consolidated with the other AMCOR cases, including Prati. We disagree. The
instant case was conspicuously listed in footnote two of Prati I, and Judge
Block, based on the representations made by plaintiffs’ counsel there, who is
also instant plaintiffs’ counsel, clearly included the cases listed there within the
ambit of his opinion. Moreover, the Federal Circuit affirmed Judge Block’s
opinion, holding that we lack jurisdiction over the timeliness and taxmotivated interest claims. See Prati III, 603 F.3d at 1308-09.
While Prati I was pending at the Federal Circuit, several AMCOR
partners, including plaintiffs here, asserted in a motion for reconsideration
facts different from those common with Prati and moved to alter or amend the
judgment. Judge Block denied the motion with respect to the underlying
common AMCOR claims (including the untimely assessment and taxmotivated interest claims), but expressly vacated Prati I only “for the limited
purpose of allowing plaintiffs to pursue any unresolved, case-specific claims
that may still be outstanding.” Prati II, 82 Fed. Cl. at 379. In other words,
Prati II vacated plaintiffs’ judgments for the limited purpose of allowing only
case-specific claims to proceed, because “the parties requested that the Court
first resolve the jurisdictional issues arising in the AMCOR tax partnership
cases and that for such a purpose [Prati I] should serve as a representative
case.” Id. at 374. Judge Block reiterated this in his March 29, 2011 order
denying transfer: “The court’s [April 18, 2008] order to vacate judgment in
[Barry and other cases] did not, as plaintiffs seem to assume, vacate the
dismissal of these common claims.” Isler, No. 01-344, 3 (Fed. Cl. Mar. 29,
2011). Judge Block could not have been more clear. It is plain, therefore, that
he did not reinstate plaintiffs’ timeliness and tax-motivated interest claims
under I.R.C. §§ 6229(a) and 6621(c). Accordingly, the common AMCOR
claims relating to I.R.C. §§ 6229(a) and 6621(c) have been resolved.
8
II.
Reconsideration of Prati I is not warranted
Plaintiffs argue that even if Prati I, II, and III apply, reconsideration is
warranted because of factual differences relating to the distinction between
settled and non-settled partners and subsequent changes in the law. They offer
the affidavit of their tax matters partner (“TMP”), Frederick H. Behrens. Mr.
Behrens provides information concerning the negotiations leading to the entry
of the stipulated decisions in the Tax Court. Mr. Behrens asserts that his
understanding and intent were that: (1) in his capacity as an individual partner,
he could settle only those partnership, non-partnership, and affected items
regarding himself; (2) in his capacity as TMP, he could bind other partners
only to partnership items; and (3) that neither he nor the Tax Court had
authority to bind other partners to any non-partnership item under his
contingent agreement with the IRS. Pls.’ Mot. Recon. App. 4. Plaintiffs argue
that these new allegations prompt reconsideration.
The arguments made by plaintiffs are not novel to this motion for
reconsideration. Plaintiffs’ counsel has advanced similar arguments in support
of motions for reconsideration in the other AMCOR cases. The judges of this
court uniformly have denied those motions,5 and we find their reasoning
persuasive. We adopt in full Judge Wheeler’s rationale set out in Fournier v.
United States, 2011 WL 6187094 (Fed. Cl. Dec. 13, 2011), and for the reasons
expressed there, we deny plaintiffs’ motion for reconsideration of the decision
in Prati I.
CONCLUSION
For the reasons stated above, we deny plaintiffs’ motion for
reconsideration. Because plaintiffs’ counsel represented to the court in the
May 24, 2011 status report that plaintiffs did not desire to pursue any casespecific claims, we dismiss the claim in its entirety. The clerk is directed to
enter final judgment for defendant and dismiss the case accordingly. No costs.
5
See Northcutt v. United States, 2012 WL 300410 (Fed. Cl. Jan. 31,
2012); Donaldson v. United States, No. 03-2875 (Fed. Cl. Jan. 6, 2012)
(unpublished); Corkill v. United States, 2012 WL 251987 (Fed. Cl. Jan. 6,
2012); Fournier v. United States, 2011 WL 6187094 (Fed. Cl. Dec. 13, 2011);
Martin v. United States, 2011 WL 6035557 (Fed. Cl. Dec. 5, 2011); Boland v.
United States, No. 06-859 (Fed. Cl. Nov. 17, 2011) (unpublished).
9
s/ Eric G. Bruggink
ERIC G. BRUGGINK
Judge
10
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