Shiner v. Turnoy

Filing 63

MEMORANDUM Opinion and Order. Accordingly, in the exercise of judicial discretion that Congress has conferred in Section 7434(b)(3), Turnoy is ordered to pay to Shiner the requested sum of $16,314.90. This is the final judgment in this action. Signed by the Honorable Milton I. Shadur on 8/11/2014. Mailed notice(tlp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DAVID SHINER,
Plaintiff,
v.
BERNARD I. TURNOY,
Defendant.

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Case No. 13 C 5867

MEMORANDUM OPINION AND ORDER
This is the ultimate followup on this Court's July 11, 2014 memorandum opinion and
order ("Opinion") that held defendant Bernard Turnoy ("Turnoy") to have willfully filed a
fraudulent income tax information return, thus violating 26 U.S.C. § 7434 ("Section 7434"), by
transmitting a Form 1099-MISC ("1099") to the Internal Revenue Service ("IRS") that reported
that Turnoy had made a "payment" to Shiner in 2012 -- a flat-out untruth that Turnoy clearly
knew to be false. Having prevailed on that score following the litigants' submission of
cross-motions for summary judgment, Shiner has now filed a Motion for Damages and Final
Judgment (Dkt. No. 56) under the express provisions of Section 7434(b):
In any action brought under subsection (a), upon a finding of liability on the part
of the defendant, the defendant shall be liable to the plaintiff in an amount equal
to the greater of $5,000 or the sum of -(1) any actual damages sustained by the plaintiff as a proximate
result of the filing of the fraudulent information return (including
any costs attributable to resolving deficiencies asserted as a result
of such filing),
(2) the cost of the action, and
(3) in the court's discretion, reasonable attorneys' fees.

Shiner does not list any "actual damages" that he has sustained in consequence of
Turnoy's fraudlent filing. But plainly that is true only because this lawsuit had to be brought to
head off the inevitability of a large deficiency assessment by the IRS for the year 2012 directly
attributable to Shiner's entirely proper nonreporting, in his income for that year, a purported
"payment" to him falsely reported by Turnoy in the earlier-referred-to 1099. Instead this
preemptive lawsuit has itself generated real-world damages to Shiner in the form of the legal fees
that he has had to incur to head off what would surely have been considerably larger "costs 1
attributable to resolving deficiencies asserted as a result of such filing" (to quote Section
7434(b)(1)'s example of "actual damages sustained by the plaintiff"). And as for the statute's
"proximate result" requirement, it is also unquestionable that this lawsuit would not have been
brought (with Shiner's essential incurring of attorneys' fees to bring and pursue it) to challenge
Turnoy's fraudulent filing but for that filing itself. 2 Any potential deficiency assessment for the
year 2012 by the IRS has been effectively negated by the Opinion, a copy of which this Court
has transmitted to the IRS's Chicago Office (just as the Opinion had forecast in its footnote 5).
When this Court first received Shiner's current motion, its initial reaction was that the
motion might be viewed as posing an interesting variant on the usual situation encountered in
any type of litigation that includes a potential award of attorneys' fees as a consequence of the
prevailing party's success. Thus in the context of civil rights litigation under 42 U.S.C. § 1983,
where 42 U.S.C. § 1988 calls for an award of attorneys' fees to a prevailing-party plaintiff, Farrar
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1
Ironically, those "costs" would have embraced legal fees incurred in contesting any
deficiency assessed by the IRS.
2

What has just been said in the text is directly confirmed by the terms of each party's
Motion for Summary Judgment (Shiner's motion is Dkt. 21, while Turnoy's cross-motion is
Dkt. 24).
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v. Hobby, 506 U.S. 103 (1992) upheld the denial of fees to a plaintiff who, although a
"prevailing party," had prevailed only to the extent of obtaining a "nominal" damages award of
$1 (see Carey v. Piphus, 435 U.S. 247 (1978)). And our Court of Appeals has since adopted the
approach set out in Justice O'Connor's concurring opinion in Farrar, 506 U.S. at 120-22, in a
situation where a plaintiff had achieved a somewhat larger "de minimis" victory rather than a
purely "nominal" damages award (see Aponte v. City of Chicago, 728 F.3d 724, 727-28 (7th Cir.
2013)).
But before this opinion turns to the resolution of that issue in the context of this case, this
Court wishes to eliminate any possible misunderstanding as to the real thrust of the Opinion. On
that score it should be emphasized that this Court found no illegality involved as such in
Turnoy's having placed a restrictive endorsement on the check for some $150,000 that he sent to
Shiner in December 2012. That was based on Turnoy's position as to the amount that he owed
Shiner as the latter's 50% share of the commissions generated by the procurement of two life
insurance policies that had been issued in the preceding month. 3 There was no legal impropriety
in Turnoy's effort to put pressure on Shiner, and thus to avoid a dispute and possible litigation on
that issue, by pursuing his carrot-and-stick approach:
Here is your ability to collect what I say I owe you -- but to cash the check, you'll
have to give up your claim that I owe you more than that.
Where Turnoy crossed the border from that lawful effort to exert commercial pressure
into the forbidden area of illegality, however, was in his reporting that amount to the IRS as
"payment" when it clearly was not. And Shiner's institution and prosecution of this litigation
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3
It ultimately turned out, as confirmed by state court litigation between the parties, that
Turnoy's position as to the amount he owed Shiner was right and Shiner's much larger claim was
wrong -- a fact that was and is irrelevant to the Section 7434 issue posed by this litigation.
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was entirely proper to challenge that illegality and, in so doing, to spare himself the necessary
expenditure of a good deal more in the difficulty (and the necessary expenditure of substantial
accompanying attorneys' fees) that surely would have flowed from the disparity between (1) the
false and fraudulent 1099 and (2) Shiner's 2012 tax return that properly omitted the
approximately $150,000 non-payment.
In short, any superficial possible analogy between the type of case exemplified by Farrar
or Aponte does not survive further analysis. Shiner has established his having incurred costs of
$1,002.90 plus attorneys' fees aggregating $15,312 through April 18 of this year, and nothing has
suggested any error or unreasonableness in either of those figures. It would be a major injustice
for Shiner to be compelled to bear, unrecompensed, those amounts expended to establish the
unlawfulness of Turnoy's willfully fraudulent filing of the 1099.
Accordingly, in the exercise of judicial discretion that Congress has conferred in Section
7434(b)(3), Turnoy is ordered to pay to Shiner the requested sum of $16,314.90. This is the final
judgment in this action.

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Milton I. Shadur
Senior United States District Judge
Date: August 11, 2014

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