Babcock Center Inc v. United States of America, The

Filing 105

OPINION AND ORDER denying (99) Motion for Reconsideration in case 3:11-cv-01721-CMC; denying (84) Motion for Reconsideration in case 3:11-cv-03155-CMC. Signed by Honorable Cameron McGowan Currie on 6/20/2013.Associated Cases: 3:11-cv-01721-CMC, 3:11-cv-03155-CMC(ssam, )

UNITED STATES DISTRICT COURT
IN THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
Babcock Center, Inc.,
Plaintiff,
v.
United States of America, acting by and
through its agency, the Internal Revenue
Service,
Defendant.

Babcock Center, Inc.,
Plaintiff,
v.
United States of America, acting by and
through its agency, the Internal Revenue
Service,
Defendant.

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C/A No. 3:11-01721-CMC
C/A No. 3:11-03155-CMC
OPINION AND ORDER

This matter is before the court on Plaintiff’s motion, filed on June 17, 2013, one week prior
to trial, to reconsider two of the court’s prior orders. Dkt. No. 99. On June 19, 2013, Defendant
responded to Plaintiff’s motion. Plaintiff replied on June 20, 2013. Dkt. No. 104. For reasons
stated below, the court denies Plaintiff’s motion.
I. Fourth Quarter of 2008 (May 2, 2013 Order)
Plaintiff filed a motion to reconsider the court’s May 2, 2013 order (Dkt. No. 79) granting
summary judgment in favor of Defendant as to Plaintiff’s claim for refund of penalties for the fourth
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quarter of 2008. The court found that Plaintiff’s “failures to deposit and pay payroll taxes in the last
quarter of 2008 were due to willful neglect.” As a result, the court held that Plaintiff was not entitled
to a refund of penalties under the reasonable cause exception. Dkt. No. 79 at 10. In its motion for
summary judgment, Defendant highlighted evidence showing that confusion among staff as to who
was depositing payroll taxes was the cause of the failures to deposit and pay payroll taxes in the
fourth quarter of 2008. Dkt. No. 43-1 at 9, 23. In response, Plaintiff generally cited to a witness’s
affidavit, which stated that the payroll tax failures in 2007 and 2008 were due to insufficient cash
on hand, without mentioning any confusion among staff as to the party responsible for making those
payments. Dkt. No. 57 at 12-13. Concluding that a witness’s subsequent affidavit cannot create a
dispute about a fact contained in an earlier deposition, the court found there was no factual dispute
as to the cause of failures to deposit and pay in this tax quarter. Dkt. No. 79 at 9 n.10. Now,
Plaintiff argues that there is a factual dispute as to the cause of the failures by citing to different
portions of deposition testimony.
Plaintiff moves the court to reconsider under Rules 59(e) and 60(b)(6) of the Federal Rules
of Civil Procedure. Rule 59(e) allows the court to alter or amend an earlier judgment “‘(1) to
accommodate an intervening change in controlling law; (2) to account for new evidence not available
at trial; or (3) to correct a clear error of law or prevent manifest injustice.’” Becker v. Westinghouse
Savannah River Co., 305 F.3d 284, 290 (4th Cir. 2002) (quoting Pac. Ins. Co. v. Am. Nat'l Fire Ins.
Co., 148 F.3d 396, 403 (4th Cir. 1998)). “Rule 59(e) motions may not be used, however, to raise
arguments which could have been raised prior to the issuance of the judgment, nor may they be used
to argue a case under a novel legal theory that the party had the ability to address in the first
instance.” Pac. Ins. Co., 148 F.3d at 403 (citing Russell v. Delco Remy Div. of Gen. Motors Corp.,
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51 F.3d 746, 749 (7th Cir. 1995)).
The court’s May 2, 2013 order did not result in the entry of judgment because that order did
not resolve all claims presented by Plaintiff. Accordingly, the court considers Plaintiff’s motion to
reconsider the court’s May 2, 2013 order as a Rule 60(b) motion.
Having construed Plaintiff’s motion as one for relief pursuant to Rule 60, the court
determines that Plaintiff is proceeding under Rule 60(b)(6), as no other subsection of Rule 60(b) is
applicable in this circumstance. Indeed, Plaintiff only cites subsection (b)(6) when describing the
grounds for relief under Rule 60(b). Dkt. No. 99. Rule 60(b)(6) states in relevant part that “the court
may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: . . . (6)
any other reason that justifies relief.” Rule 60(b)(6) permits the court to vacate orders whenever such
action is appropriate to accomplish justice and where relief might not be available under any other
clause in 60(b). Eberhardt v. Integrated Design & Const., Inc., 167 F.3d 861, 872 (4th Cir. 1999).
Rule 60(b)(6) “should only be applied in ‘extraordinary circumstances.’” Valero Terrestrial Corp. v.
Paige, 211 F.3d 112, 118 (4th Cir. 2000) (internal quotation marks omitted). The Fourth Circuit has
described Rule 60(b)(6) as serving as the court’s “grand reservoir of equitable power to do justice in
a particular case.” National Credit Union Admin. Bd. v. Gray, 1 F.3d 262, 266 (4th Cir.1993) (internal
quotation marks omitted).

This is not a case in which the court’s May 2, 2013 order must be vacated to accomplish
justice. Plaintiff’s motion to reconsider raises new arguments that could have been raised prior to
the issuance of the court’s order. The court, therefore, denies Plaintiff’s motion to reconsider the
court’s order granting summary judgment in favor of Defendant on Plaintiff’s claim for refund of

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penalties for the fourth quarter of 2008.1
II. Fourth Quarter of 2007 (June 4, 2013 Order)
Plaintiff’s motion to reconsider also addresses the court’s June 4, 2013 order (Dkt. No. 96)
dismissing Plaintiff’s claim for refund of penalties for the fourth quarter of 2007 for lack of
jurisdiction. Defendant had previously moved to dismiss Plaintiff’s claim for refund for this tax
quarter, arguing that Plaintiff did not file a claim for refund with the IRS for this period as is required
prior to bringing suit in district court. Dkt. No. 43-1 at 28-29. Plaintiff responded that its prior

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To the extent Plaintiff’s motion to reconsider is one under Rule 54(b), the court reaches
the same result. Pretrial rulings remain subject to reconsideration by the trial court “and may be
revised at any time before the entry of a judgment adjudicating all the claims and all the parties’
rights and liabilities.” Fed. R. Civ. P. 54(b). Under this rule, “a district court retains the power
to reconsider and modify its interlocutory judgments, including partial summary judgments, at
any time prior to final judgment when such is warranted.” Am. Canoe Ass’n v. Murphy Farms,
Inc., 326 F.3d 505, 514–515 (4th Cir. 2003) (citing Fayetteville Investors v. Commercial
Builders, Inc., 936 F.2d 1462, 1469 (4th Cir. 1991)). While Rule 54(b) allows the trial court to
conduct a de novo review of its pretrial rulings, countervailing considerations suggest the court
should modify a prior ruling only when the court is convinced that a prior ruling was incorrect or
that changes in the record or the stage of the proceeding justify modification. See generally
Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, 18A Federal Practice and Procedure
§ 4478.1 (2d ed. as supplemented through 2010) (discussing competing interests).
The grounds for review of non-final rulings are not, therefore, as constrained as those
applicable to review of judgments. See generally Saint Annes Devel. Co. v. Trabich, 443 Fed.
Appx. 829, 832 (4th Cir. 2011) (reversing district court for applying Fed. R. Civ. P. 59(e)
standard to non-final ruling); but see Pinney v. Nokia, Inc., 402 F.3d 430 (4th Cir. 2005)
(suggesting a more constrained standard of review). Although not limited by the Rule 59(e)
standard, the court finds that standard instructive as a general guide for considering when
modification of a non-final ruling may be appropriate. See generally Hutchinson v. Staton, 994
F.2d 1076, 1081 (4th Cir. 1993) (recognizing three limited grounds for relief under Rule 59(e) –
(1) to accommodate an intervening change in controlling law; (2) to account for new evidence
not available earlier; or (3) to correct a clear error of law or prevent manifest injustice – and
noting that a party’s mere disagreement with the court’s ruling does not warrant a Rule 59(e)
motion).
Plaintiff has not convinced the court that its prior ruling was incorrect, and Plaintiff has
certainly not identified any new evidence that was previously unavailable. The court would,
therefore, deny any request to reconsider the court’s May 2, 2013 order under Rule 54(b).
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filings satisfied the requirements, either as a formal claim or informal claim. Dkt. No. 57 at 29-30.
Because Defendant failed to respond to Plaintiff’s argument in reply, the court denied Defendant’s
motion to dismiss the claim for this tax quarter based on inadequate briefing, particularly as to the
issue of whether Plaintiff had filed an informal claim. Dkt. No. 79 at 24. Through its pre-trial brief,
Defendant adequately briefed the issue. Dkt. No. 86 at 13-16. Determining that the court lacked
jurisdiction over the claim for refund for the fourth quarter of 2007, the court dismissed this claim.
Dkt. No. 96. In its motion to reconsider, Plaintiff argues that the court has jurisdiction because it (1)
filed a formal claim for refund, or (2) alternatively filed an informal claim, which was cured by the
recent filing of a formal claim on June 14, 2013.
Under either Rule 54(b), 60(b)(6) or 54(b), the court finds that Plaintiff has not shown that
it is entitled to relief from the court’s dismissal of Plaintiff’s claim for refund for the fourth quarter
of 2007. For the reasons stated in the court’s June 4, 2013 order, the evidence cited by Plaintiff does
not indicate that it filed a formal claim for refund of penalties for this tax period prior to filing this
action. The additional cited letter from the IRS to Amy Cain of the Babcock Center similarly fails
to indicate that Plaintiff ever filed a formal claim for refund of penalties for the fourth quarter of
2007 prior to this action. Neither do these documents satisfy the requirements for an informal claim.
Even assuming that these documents constitute an informal claim, Plaintiff has failed to
perfect its claim by timely filing a formal claim. See, e.g., PALA, Inc. Empl. Profit Sharing Plan and
Trust Agreement v. United States, 234 F.3d 873, 879 (5th Cir. 2000) (finding letter to IRS, which
provided notice of claim to refund, was insufficient because it “was not subsequently amended by
a formal claim”), Kaffenberger v. United States, 314 F.3d 944, 955 (8th Cir. 2003) (“An informal
claim which is partially informative may be treated as valid even though ‘too general’ or suffering
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from a ‘lack of specificity’– at least where those defects have been remedied by a formal claim filed
after the lapse of the statutory period but before the rejection of the informal request.”) (internal
quotations omitted); Follum v. United States, No. 5:07-CV-13-F, 2007 WL 2847930, *2 (W.D.N.C.
Aug. 8, 2007) (“[E]ven if Petitioner’s tax returns, the request for hearing or the petition were
considered an informal claim for refund, the fact remains that Petitioner has not filed a formal
administrative claim.”), aff’d per curiam, 267 F. App’x 308, 2008 WL 582511 (4th Cir. Mar. 3,
2008). Although Plaintiff argues that it submitted a formal claim for refund of penalties paid for the
fourth quarter of 2007 six days ago (Dkt. No. 99-6), this late filing does not cure the jurisdictional
defect. See 26 U.S.C. § 6532 (a)(1)2 (requiring a taxpayer to wait to file a lawsuit in district court
until after the IRS denies a request for refund, or until six months after a claim is filed, whichever
comes first). Plaintiff has cited no authority that a taxpayer may perfect an informal claim by filing
a formal claim after it has filed suit in district court, without a decision by the IRS as to whether a
refund will be awarded, and on the eve of trial.3 The court, therefore, concludes that Plaintiff has

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26 U.S.C. § 6532 (a)(1) provides:
No suit or proceeding under section 7422(a) for the recovery of any internal
revenue tax, penalty, or other sum, shall be begun before the expiration of 6
months from the date of filing the claim required under such section unless the
Secretary renders a decision thereon within that time, nor after the expiration of 2
years from the date of mailing by certified mail or registered mail by the Secretary
to the taxpayer of a notice of the disallowance of the part of the claim to which the
suit or proceeding relates.
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In reply, Plaintiff cites to United States v. Kales, 314 U.S. 186 (1941), for the
proposition that a later filed formal claim curing the defects of an informal claim “relates back to
the date of notice to the Commissioner of Babcock Center’s [informal] claim.” Dkt. No. 104 at
4. Although a formal claim filed after the limitations period has run may relate back to an
informal claim to save a taxpayer’s claim for refund, nothing in Kale suggests that the taxpayer
need not wait for a decision from the IRS on the claim for refund (or alternatively six months
after filing the claim in which no decision has been made) prior to filing suit in district court. In
Kales, the taxpayer filed a formal claim after the limitations period, which the court held related
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failed to demonstrate it is entitled to relief from the court’s June 4, 2013 order dismissing its claim
for refund for the fourth quarter of 2007 for lack of jurisdiction.
CONCLUSION
Plaintiff’s motion to reconsider is denied.
IT IS SO ORDERED.

S/ Cameron McGowan Currie
CAMERON MCGOWAN CURRIE
UNITED STATES DISTRICT JUDGE
Columbia, South Carolina
June 20, 2013

back to an informal claim submitted within the limitations period. 314 U.S. at 191. The IRS
denied the taxpayer’s claim for refund based on the statute of limitations. Id. at 191-92. The
taxpayer then filed suit in district court. Id. at 192. The facts and procedural posture of Kale,
therefore, do not support Plaintiff’s proposition. In other words, the relation back doctrine does
not cure the jurisdictional defect in this case. Principles of administrative law weigh in favor of
agency action prior to federal litigation. Nothing in the record shows that the IRS has denied
Plaintiff’s claim for refund for the fourth quarter of 2007, and six months have not passed since
the perfection of Plaintiff’s informal claim, as required by 26 U.S.C. § 6532 (a)(1).
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