Bombardier Aerospace Corporation v. United States of America
Filing
82
MEMORANDUM OPINION AND ORDER denying 79 MOTION for Leave to File Supplemental Complaint and Supplemental Answer to Counterclaim filed by Bombardier Aerospace Corporation; and granting 81 Motion for Judgment filed by United States of America. (Ordered by Judge Sidney A Fitzwater on 4/17/2015) (Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
BOMBARDIER AEROSPACE
CORPORATION,
Plaintiff-counterdefendant,
VS.
UNITED STATES OF AMERICA,
Defendant-counterplaintiff.
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Civil Action No. 3:12-CV-1586-D
MEMORANDUM OPINION
AND ORDER
The April 15, 2015 motion of plaintiff-counterdefendant Bombardier Aerospace
Corporation (“BAC”) for leave to supplement the complaint and supplement answer to
counterclaim and reply is denied, and the April 16, 2015 motion of defendant-counterplaintiff
United States of America (the “government”) for entry of final judgment is granted.1
I
On March 20, 2015 the court filed its memorandum opinion and order granting the
government’s motion for summary judgment and BAC’s motion for summary judgment. See
Bombardier Aerospace Corp. v. United States, ___ F.Supp.3d ___, 2015 WL 1279513, at
*23 (N.D. Tex. Mar. 20, 2015) (Fitzwater, J.) (“Bombardier I”). As provided in Bombardier
1
Under § 205(a)(5) of the E-Government Act of 2002 and the definition of “written
opinion” adopted by the Judicial Conference of the United States, this is a “written opinion[]
issued by the court” because it “sets forth a reasoned explanation for [the] court’s decision.”
It has been written, however, primarily for the parties, to decide issues presented in this case,
and not for publication in an official reporter, and should be understood accordingly.
I, the court is only awaiting submission of a proposed form of judgment before entering a
final judgment. The government is to draft a form of judgment for review by BAC’s counsel
for proper form, and then submit it to the court for consideration. Id.2
On April 15, 2015 BAC filed its motion for leave to supplement the complaint and
supplement answer to counterclaim and reply. BAC seeks leave under Fed. R. Civ. P. 15(d)
to supplement its complaint, and under Rules 15(a)(2) and 16(d)(4) to supplement its answer
to counterclaim and reply. It maintains that it is requesting leave to add the unfair
competitive disadvantage principle as a separate count (separate from the Duty of Clarity),
and to add misapplication of penalties under 26 U.S.C. § 6651(a)(2).
In support of pleading the unfair competitive disadvantage principle, BAC posits that,
until the Southern District of Ohio issued its January 26, 2015 decision in NetJets Large
Aircraft, Inc. v. United States, ___ F.Supp.3d ___, 2015 WL 313939 (S.D. Ohio Jan. 26,
2015), BAC was unaware of the grounds to support pleading the unfair competitive
disadvantage principle as a separate count. It asserts that it was unaware until the NetJets
decision that the Internal Revenue Service (“IRS”) is prohibited from re-auditing NetJets
regarding the application of FET on MMF and FSF, and that the 1992 TAM issued to NetJets
has not been withdrawn and continues to provide that NetJets is not required to collect FET
on MMF and FSF. BAC contends that “the Motion to Supplement responds to the decision
2
The court concluded that this procedure appeared advisable in case it was necessary
to compute sums (such as interest) that had accrued during the pendency of the litigation.
Bombardier I, 2015 WL 1279513, at *23 n.29.
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issued in NetJets, and, in particular, that portion of the decision discussing the IRS’ legal
inability to audit NetJets on this issue until the IRS withdraws its 1992 TAM—a critical fact
unknown to Plaintiff until January 26, 2015.” P. 4/15/15 Br. 8.
Concerning misapplication of penalties under 26 U.S.C. § 6651(a)(2), BAC requests
leave to supplement its answer to counterclaim and reply to include issues regarding the
penalties that the IRS has assessed under 26 U.S.C. § 6651(a)(2). BAC contends that
§ 6651(a)(2) does not apply in this case, or, alternatively, that BAC has the right to assert as
a defense that its failure to pay FET was reasonable and not due to willful neglect.
BAC contends that, once its motion is granted, the court should stay the proceedings
in this case “while necessary facts unfold regarding the potential finality of relief granted in
NetJets,” P. 4/15/15 Br. 10, and it requests a briefing schedule or the opportunity to file
another motion to address any potential issue regarding a stay of proceedings.
On April 16, 2015 the government filed its motion for entry of final judgment.
II
Although the government’s motion for entry of final judgment is unnecessary,3 it is
granted.
3
The motion is unnecessary because the court in Bombardier I directed the
government to present a draft form of judgment for review by BAC’s counsel for proper form
and for the court’s consideration for entry. The government represents in its motion that its
counsel presented a draft form of judgment for review by BAC’s counsel on April 1, 2015.
D. 4/16/15 Mot. 1. A period of 15 days (April 1 to April 16, 2015) was more than reasonable
for BAC’s counsel to have reviewed the form of the judgment. There should have been no
need for the government to incur further delay and move the court to enter a final judgment.
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III
The court denies BAC’s motion for leave to supplement the complaint and supplement
answer to counterclaim and reply.
A
BAC contends that “evidence that the IRS is treating similarly situated taxpayers
differently gives rise to this claim.” P. 4/15/15 Br. 2. But if BAC was actually unaware until
the NetJets decision of the grounds for pleading the unfair competitive disadvantage principle
as a separate count, the fault lies with BAC. BAC acknowledges in its brief that the unfair
competitive advantage principle has been at issue throughout this litigation. See id. at 1
(“Throughout this case, Plaintiff raised its competitive disadvantage as part of the Duty of
Clarity argument. Defendant raised the unfair competitive disadvantage principle as an
affirmative defense in response to the Duty of Clarity and acknowledged there is a
competitive disadvantage if NetJets is not required to collect FET on monthly management
fees (‘MMF’) and fuel surcharge.’”); id. at 5 (“This issue is intertwined with and previously
included in the Duty of Clarity argument.”); id. (“the unfair competitive disadvantage
principle has been a part of this case from the very beginning”). Moreover, BAC was
obviously aware of the decision in Executive Jet Aviation v. United States, 125 F.3d 1463
(Fed. Cir. 1997), its potential impact on the IRS’s collection of FET from NetJets, and the
possibility that BAC could develop evidence through the IRS’s treatment of NetJets that
would support the unfair competitive disadvantage principle. See, e.g., Bombardier I, 2015
WL 1279513, at *10 (noting BAC’s contention that, “even if Executive Jet applies, it
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supports BAC’s position because the government conceded in Executive Jet that FET are not
owed on MMF”); id. at *11 (noting that one of BAC’s six grounds for contending that it is
entitled to a refund and abatement of FET on MMF is that “the IRS stipulated in Executive
Jet that FET did not apply to MMF (which the Executive Jet court noted in its opinion), and
at no time has the government issued a statement deviating from this position.”). Finally,
BAC was aware based on the IRS’s concession of FET on MMF in its own case that the IRS
was relying on the unfair competitive disadvantage principle to concede that no additional
FET were owed. The IRS Appeals officer wrote to BAC on March 6, 2007 advising that he
was recommending that FET on MMF be conceded in full for the tax periods in question due
to the unfair competitive disadvantage principle. The court noted in Bombardier I that “there
is ample record evidence that the IRS made this concession based on the taxation of MMF
paid as part of Executive Jet’s fractional interest program (most recently the subject of the
NetJets case).” Bombardier I, 2015 WL 1279513, at *16 n.20. And BAC cites in its brief
other summary judgment evidence—provided during discovery in this case—that identifies
NetJets as the major competitor whose disparate treatment prompted the IRS to concede FET
on MMF. P. 4/15/15 Br. 6. Accordingly, there is no apparent reason why BAC could not
have conducted any investigation or taken any additional discovery4 needed to enable it to
4
BAC asserts that “the critical admission . . . that Plaintiff would be in a competitive
disadvantage to NetJets if NetJets did not have to pay FET on MMF, was in the Defendant’s
files.” P. 4/15/15 Br. 5. BAC does not explain why, given the importance of the unfair
competitive disadvantage principle as an issue, it could not have discovered this evidence and
sought leave to supplement its complaint well before April 15, 2015.
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obtain the factual support necessary to plead the unfair competitive disadvantage principle
as a separate count long before it filed its April 15, 2015 motion, or why the evidence
presented in the summary judgment briefing—which was completed on June 10,
2014—could not have given BAC a basis to request the relief that it now seeks for the first
time after the court has decided the summary judgment motions.
Moreover, the only reason BAC’s motion is a pre-judgment motion rather than a postjudgment motion is that the court deferred entering a judgment in the case so that sums that
had accrued during the pendency of the litigation could be computed. BAC took advantage
of this delay to make a motion that it could easily have made before the court issued
Bombardier I on March 20, 2015. Had the court entered judgment, BAC’s motion—which
would effectively abrogate the court’s summary judgment rulings if granted—would have
been evaluated under the Rule 59(e) standard, if not under the Rule 60(b)(2) standard for
newly-discovered evidence.
But even if the court assumes arguendo that BAC could not have learned of the IRS’s
position regarding NetJets before the NetJets decision was filed, the court still concludes that
BAC’s motion should be denied.
First, BAC unduly delayed in filing its motion. It was aware of the NetJets decision
at least by January 27, 2015, when the court issued an order directing the parties to file
supplemental briefs stating their positions regarding whether the court should follow NetJets,
and, if so, how NetJets affected the disposition of the parties’ summary judgment motions.
BAC was aware that, once the supplemental briefing was completed on February 24, 2015,
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the court would again take up the parties’ summary judgment motions, which had been orally
argued on October 31, 2014. But BAC did not file this motion until more than three weeks
after the court issued Bombardier I on March 20, 2015.
Second, BAC could at least have requested that the court defer its ruling on the
summary judgment motions, but it did not. This delay unduly prejudiced the court, which
devoted a substantial amount of time to deciding the motions and writing a comprehensive
opinion—resources that could have been devoted to several other cases.
In its brief, BAC contends that it specifically addressed the issue of unfair competitive
disadvantage principle in its February 10, 2015 supplemental brief, and that it filed that brief,
rather than a motion to supplement its complaint, “because this Court issued an order inviting
the parties to brief how the decision in NetJets affects this litigation.” P. 4/15/15 Br. 4. This
assertion lacks force. Nothing in the court’s order inviting supplemental briefing prevented
BAC from filing a motion for leave to supplement its complaint. Indeed, not even the filing
of Bombardier I on March 20, 2015—a final decision on the merits—has had this deterrent
effect on BAC. If anything, the court’s January 27, 2015 briefing order created a window
for BAC to argue—if it actually had grounds to do so—that it was unaware until the NetJets
decision of the basis to plead the unfair competitive disadvantage principle as a separate
count, and to request that the court abate its summary judgment rulings until the court could
consider a motion to supplement the complaint.
BAC also posits that it filed its supplemental brief 78 days before the calendared trial
date, and that it “could not have fully pled this issue earlier since it rests primarily upon the
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information included in the January 26, 2015 NetJets Memorandum and Opinion.” P.
4/15/15 Br. 4. The court rejects this contention. The court has already determined that BAC
could have become aware through an investigation, discovery, or the summary judgment
record of the basis to plead the unfair competitive disadvantage principle as a separate count.
BAC could certainly have filed this motion well before it did: several weeks after the court
issued Bombardier I. And, at a minimum, BAC could have requested that the court defer a
ruling based on the NetJets decision.
B
Regarding BAC’s request to supplement its answer to counterclaim and reply, BAC
does not attempt to argue that it only recently became aware of the grounds for this
amendment. It acknowledges that the government pleaded for penalties under 26 U.S.C.
§ 6651(a)(2) in its amended answer and counterclaim, which was filed on November 15,
2012. It is clearly too late for BAC to move to supplement its answer to counterclaim and
reply on this basis.
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Accordingly, BAC’s motion for leave to supplement the complaint and supplement
answer to counterclaim and reply is denied, and the government’s motion for entry of final
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judgment is granted.
SO ORDERED.
April 17, 2015.
_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE
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