Tarpey et al v. United States

Filing 101

ORDER; Tarpeys Motion to Exclude Expert Report of Bruce G. Dubinsky 92 is DENIED. Signed by Judge Brian Morris on 8/4/2020. (TLO)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
CV-17-94-B-BMM
JAMES TARPEY,
Plaintiff and Counter-Defendant,
vs.

ORDER ON MOTION TO
EXCLUDE EXPERT REPORT

UNITED STATES,
Defendant and Counter-Plaintiff.

Plaintiff and Counter-Defendant James Tarpey filed a Motion to Exclude
Expert Report of Bruce G. Dubinsky. (Doc. 92). Defendant and Counter-Plaintiff
the United States opposes the motion. (Doc. 97). Tarpey filed a reply. (Doc. 98).
The Court deems it appropriate to resolve the matter without the need for a
hearing.
BACKGROUND
The Court has issued two separate orders regarding summary judgment.
(Docs. 51 and 83). The Court initially resolved Tarpey’s liability for penalties
pursuant to 26 U.S.C. § 6700 in favor of the United States. (Doc. 51 at 21). The
Court’s first order left unresolved the amount of penalties to be assessed against
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Tarpey. (Id. at 21). The Court conducted a second hearing on August 22, 2019, at
which the parties disputed the amount of penalty for which Tarpey should be
liable. The United States requested that the Court enter judgment against Tarpey
for the unpaid balance of the § 6700 penalty, totaling $9,025,265.24 plus interest.
Tarpey countered that his penalty should be $270, 215.
The Court rejected Tarpey’s claim that his appraisals of timeshare donations
to DFC represented the only activity for which the Court had determined him to be
liable. (Doc. 83 at 6). The Court determined instead that the “activity” giving rise
to the penalty to be imposed against Tarpey encompassed the entire arrangement
facilitated and organized by Tarpey to solicit timeshare donations, appraise the
timeshares, and direct profits to his other organizations. (Id.) The Court further
deemed it appropriate to pierce the corporate veil to impute DFC’s income to
Tarpey as DFC served as Tarpey’s alter ego. (Id. at 9-16). The Court declined,
based on the record before it, to declare the amount of the penalty to be assessed
against Tarpey. (Id. at 16-18). The Court concluded that the discrepancy in the
calculation presented by the United States rose to the level of a genuine issue of
material fact that precluded summary judgment. (Id. at 18).
The Court next conducted a telephonic status conference to address
amendments to the scheduling order. Following “discussion and agreement by the
parties,” the Court directed the parties to disclose their expert witnesses regarding
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the amount of the penalty by January 31, 2020. (Doc. 88 at 1). The Court granted a
motion by the United States (Doc. 90) to extend the disclosure deadline to March
31, 2020. (Doc. 91).
DISCUSSION
Tarpey bases his motion to exclude on the application of three doctrines:
judicial estoppel, judicial admission, and the law of the case. (Doc. 94). The
Court addresses the application of these doctrines in turn below.
1. Judicial Estoppel.
Tarpey argues first that the United States should be judicially estopped from
presenting a new theory on how it derived Tarpey’s penalty and the accompanying
amount. (Doc. 94 at 13-15). Judicial estoppel prevents a party from “playing fast
and loose with the courts” and avoiding unfair results and unseemliness by
adopting conflicting positions in different stages of the same proceeding. Teleglobe
Commc’n Corp. v. BCE, Inc., 493 F.3d 345, 377 (3d Cir. 2007).
The Court must analyze the following three factors to determine whether the
United States should be judicially estopped from presenting its expert witness: 1)
the “party’s later position must be clearly inconsistent with its earlier position;” 2)
“the party must have succeeded in persuading a court to accept that party’s earlier
position;” and 3) there must be an unfair advantage to be gained by the party

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seeking to assert the inconsistent position. Arizona v. Tohono O’odham Nation,
818 F.3d 549, 558 (9th Cir. 2016) (citation omitted).
Tarpey cites to several cases in support of his argument. The Third Circuit
in Teleglobe Communications Corp., declined to apply the doctrine of judicial
estoppel in the context of an attorney/client privilege claim. 493 F.3d 345, 377 (3d
Cir. 2007). The debtors took issue with the position taken by the controlling
corporation that its counsel never had represented it and the debtors. Id. The
debtors argued that the controlling corporation had relied on a joint representation
agreement in the bankruptcy court to assert a claim of privilege. Id. The debtors
contended that the controlling corporation’s representation had induced the
bankruptcy court and the special master to rely on the controlling corporation’s
concession that common-interest documents had been produced. Id. The court
concluded that the matter looked “more like a legitimate disagreement over the
scope of any joint representation (mixed with a dose of sloppiness) than it does a
bad faith attempt to mislead the courts.” Id. Tarpey makes no attempt to explain
why that result compels application of judicial estoppel here.
The court in Northern Oil & Gas, Inc. v. Continental Resources, Inc., 2017
WL 4287201, at *5-6 (D. Mont. Sept. 27, 2017), similarly concluded that judicial
estoppel did not apply. There the court addressed a dispute concerning competing
oil and gas leases in Montana. Continental Resources, Inc. (Continental) alleged
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that Northern Oil & Gas, Inc. (Northern) had taken an inconsistent position in
earlier proceedings before the Montana Board of Oil and Gas regarding its intent to
consent to a lease. The court rejected application of judicial estoppel based on its
determination that Northern did not express an intent with respect to the lease and
therefore Northern’s current position did not conflict with its prior position. Id. at
*6. Additionally, even assuming Northern had taken an inconsistent position and
had succeeded in its earlier position, the court concluded that Northern’s actions
amounted to an effort to allow it time to decide whether to make an election rather
then an effort to gain an advantage in the litigation. Id. at *8.
The Court agrees with the United States that the second factor—the party
must have succeeded in maintaining the earlier position—fails to support applying
judicial estoppel to prevent the United States from presenting Dubinsky’s expert
report. Tohono O’odham Nation, 818 F.3d at 558. The Tohono O’odham Nation
had failed to persuade an arbitrator to accept its allegedly contradictory position in
an earlier proceeding. The Ninth Circuit rejected application of judicial estoppel,
in large part, because no unfair advantage could be had when the Nation had failed
in its earlier position. Id. The United States likewise did not succeed in its prior
position on the amount of penalty, and therefore, a “later inconsistent position
introduces no risk of inconsistent court determinations, and thus poses little threat
to judicial integrity.” New Hampshire v. Maine, 532 U.S. 742, 751 (2001) (internal
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citations omitted). The amount of Tarpey’s penalty remains the “final issue before
the Court.” (Doc. 83 at 16).
The third factor and first factors similarly fail to favor Tarpey’s argument.
Tohono O’odham Nation, 818 F.3d at 558. The United States’s position does not
appear clearly inconsistent and will not result in an unfair advantage to the United
States because it has explicitly agreed to seek no more than the penalty it originally
sought, even though its expert report concluded that Tarpey actually benefited
more from the scheme than previously indicated. (Doc. 97 at 7) (“[T]he United
States agrees with Tarpey and will not seek a judgment exceeding the amount
pled.”). In that regard, the position is inconsistent, however, given the United
States’s agreement to seek no more than originally sought, no unfair advantage
exists.
The United States was complying with this Court’s previous order to provide
a full accounting of the benefit that Tarpey derived from the scheme. (Doc. 83 at
18). Tarpey remains free to rebut that evidence by presenting his own evidence of
the calculation and amount of benefit that he derived, and presenting arguments
regarding the methodology of calculating the penalty.
The cases that Tarpey cites fail to persuade the Court otherwise. In
Teleglobe Communications Corp., the court ultimately declined to apply the
doctrine of judicial estoppel, concluding that the matter looked “more like a
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legitimate disagreement over the scope of any joint representation (mixed with a
dose of sloppiness) than it does a bad faith attempt to mislead the courts.” 493 F.3d
345, 377 (3d Cir. 2007). Similarly, in Northern Oil & Gas, Inc. v. Continental
Resources, Inc., the court, assessing the factors described above, found that judicial
estoppel did not apply. 2017 WL 4287201, at *5-6.
2.

Judicial Admissions.

Tarpey next contends that the doctrine of judicial admission prevents the
United States from arguing for a higher calculation of Tarpey’s penalty. (Doc. 94
at 16-17). Tarpey argues that the initial methodology used by the United States to
calculate Tarpey’s gross income rises to the level of a judicial admission. (Id. at
19). A judicial admission typically involves a stipulation to a certain fact or
application of law to fact that removes a factual dispute from contention. Christian
Legal Soc’y Chapter of the Univ. of Cal. v. Martinez, 561 U.S. 661, 676-77 (2010).
“Factual assertions in pleadings and pretrial orders, unless amended, are
considered judicial admissions conclusively binding on the party who made them.”
Am. Title Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988). These
judicial admissions apply to matters of fact that, otherwise, would require
evidentiary proof. New Amsterdam Casualty Co. v. Waller, 323 F.2d 20, 24 (4th
Cir. 1963).

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By contrast, legal arguments typically do not constitute judicial admissions.
See MacDonald v. General Motors Corp., 110 F.3d 337, 341 (6th Cir. 1997). In
MacDonald, plaintiffs sought a determination that certain statements of counsel at
trial were “judicial admissions.” Id. at 339. The court rejected that argument. The
Sixth Circuit noted that “counsel’s statements dealt with opinions and legal
conclusions, and we are thus reluctant to treat them as binding judicial
admissions.” Id. at 341. The Sixth Circuit reasoned that the statements—which
related to negligence and proximate causation—“require the application of rules of
law to complex factual patterns.” Id. Because the statements dealt with legal
conclusions they did not “constitute binding judicial admissions.” Id. A contrary
rule would transform admissions, “a valuable time-saving device, the voluntary use
of which should be encouraged, into a trap for the unwary.” Id.
Tarpey argues that the United States has made a judicial admission to the
extent it “represented that it calculated Mr. Tarpey’s gross income, for purposes of
the penalty calculation, by looking at two lines on DFC’s form 990s.” (Doc. 94 at
17). As noted, however, counsel’s arguments regarding the manner of the penalty
computation is not susceptible to judicial admission. See Christian Legal Soc’y
Chapter of the Univ. of Cal. v. Martinez, 561 U.S. 661, 676-77 (2010). The Court
interprets a methodology to represent an argument suggesting how law can be

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applied to a set of facts rather a fact that can be admitted or denied. MacDonald,
110 F.3d at 341.
The amounts reported on the Forms 990, the underlying QuickBooks data,
and other financial records represent “facts” that could be judicially admitted.
These items are within Tarpey’s personal knowledge and undisputed. See Banks v.
Yokemick, 214 F.Supp.2d 401, 406 (S.D.N.Y. 2002) (noting that “judicial
admissions generally pertain to binding assertions of fact, matters that a party
unequivocally declares to be true because that party is uniquely positioned to know
so and concede”). The Court further notes that it possesses discretion to construe
statements of fact contained in a brief as admissions of the party. Am. Title Ins.
Co., 861 F.2d at 227. In this instance, however, the Court declines to characterize
what it deems to be legal arguments as statements of fact.
3. Law of the Case.
Tarpey argues finally that the law of the case prevents the United States’s
effort “to sandbag” him. (Doc. 94 at 19-20). The law of the case doctrine provides
that a court will not reexamine an issue previously decided by the same or higher
court in the same case. United States v. Jingles, 702 F.3d 494, 499 (9th Cir. 2012).
The Ninth Circuit’s decision in Peralta v. Dillard, 744 F.3d 1076, 1088 (9th Cir.
2014), works against this claim. The Ninth Circuit concluded that “denial of a

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summary judgment motion is never law of the case because factual development of
the case is still ongoing.” Id.
The Court denied the United States’s motion for summary judgment
regarding the proper computation of the penalty amount. The Court scheduled an
evidentiary hearing for purposes of providing a “thorough and accurate assessment
of Tarpey’s penalty amount.” (Doc. 83 at 18). “Pretrial rulings, often based on
incomplete information, don’t bind district judges for the remainder of the case.
Given the nature of such motions, it could not be otherwise.” Peralta, 744 F.3d at
1088. The Court declines to apply law of the case principles in this context.
CONCLUSION
IT IS ORDERED that the Tarpey’s Motion to Exclude Expert Report of
Bruce G. Dubinsky (Doc. 92) is DENIED.
DATED this 4th day of August, 2020.

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