Professional Documents
Culture Documents
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No. 14-2363
BRIEF OF APPELLANT
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Additional Counsel:
Jason Torchinsky (Va. 47481)
Shawn Toomey Sheehy (Va. 82630)
HOLTZMAN VOGEL JOSEFIAK, PLLC
45 North Hill Drive, Suite 100
Warrenton, VA 20186
(540) 341-8808 (telephone)
(540) 341-8809 (fax)
jtorchinsky@hvjlaw.com
ssheehy@hvjlaw.com
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______________________________________________________________________________
Appellant
who is _______________________,
makes the following disclosure:
(appellant/appellee/petitioner/respondent/amicus/intervenor)
2.
3.
10/28/2013 SCC
-1-
YES
1.
NO
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4.
Is there any other publicly held corporation or other publicly held entity that has a direct
financial interest in the outcome of the litigation (Local Rule 26.1(b))?
YES NO
If yes, identify entity and nature of interest:
5.
6.
Kaylan L. Phillips
Signature: ____________________________________
YES
NO
3/4/2015
Date: ___________________
Appellant
Counsel for: __________________________________
CERTIFICATE OF SERVICE
**************************
3/4/2015
I certify that on _________________
the foregoing document was served on all parties or their
counsel of record through the CM/ECF system if they are registered users or, if they are not, by
serving a true and correct copy at the addresses listed below:
Kaylan L. Phillips
_______________________________
(signature)
3/4/2015
________________________
(date)
-2-
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Table of Contents
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ii
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iii
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Table of Authorities
Cases
Bowles v. United States, 947 F.2d 91 (4th Cir. 1991) ............................................... 9
Cassuto v. Commr, 936 F.2d 736 (2d Cir. 1991) ...................................................11
Christian Coal. Intl v. United States, 133 F. Supp. 2d 437
(E.D. Va. 2001) .................................................................................. 10-11, 14
Don Johnson Motors, Inc. v. United States, No. B-06-047,
2008 U.S. Dist. LEXIS 36594 (S.D. Tex. Mar. 14, 2008) .......... 11, 17, 21-22
Envtl. Def. Fund, Inc. v. Watt, 722 F.2d 1081 (2d Cir. 1983) .................................34
Estate of Baird v. Commr, 416 F.3d 442 (5th Cir. 2005) .................................27, 29
Estate of Johnson v. United States, No. 11-10148-RWZ, 2013 U.S. Dist.
LEXIS 150120 (D. Mass. Oct. 18, 2013) ......................................................21
Farrar v. Hobby, 113 S. Ct. 566 (1992) ..................................................................22
Goettee v. Commr, 192 Fed. Appx. 212 (4th Cir. 2006) ..................................19, 21
Gunnells v. Healthplan Servs., 348 F.3d 417 (4th Cir. 2003) .................................26
Hanson v. Commr, 975 F.2d 1150 (5th Cir. 1992) .................................................34
Heasley v. Commr, 967 F.2d 116 (5th Cir. 1992) ............................................10, 16
Huckaby v. U.S. Dept of Treasury, 804 F.2d 297 (5th Cir. 1986).................... 10-11
Jones v. United States, 9 F. Supp. 2d 1119 (D. Neb. 1998) ........................ 26, 33-34
Jones v. United States, 9 F. Supp. 2d 1154 (D. Neb. 1998) ..............................23, 27
Jones v. United States, 207 F.3d 508 (8th Cir. 2000) ..............................................27
Keeter v. United States, No. S-96-1755, 1998 U.S. Dist. LEXIS 12457
(E.D. Cal. Aug. 3, 1998) ................................................................................23
Kenagy v. United States, 942 F.2d 459 (8th Cir. 1991) ...........................................27
iv
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Statutes
26 U.S.C. 6033 ....................................................................................................... 2
26 U.S.C. 6103 ............................................................................................... 2-3, 5
26 U.S.C. 6104(b) .................................................................................................. 2
26 U.S.C. 7213(a) .................................................................................................. 2
26 U.S.C 7430 ............................................................................................... passim
26 U.S.C 7431 ............................................................................................... passim
28 U.S.C. 1291 ....................................................................................................... 1
28 U.S.C. 2412 ..................................................................................................... 10
Other Authorities
Goldfarb and Tumulty, Washington Post, IRS admits targeting
conservatives for tax scrutiny in 2012 election, May 10, 2013....................... 4
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Jurisdictional Statement
The district court had jurisdiction based on 26 U.S.C 7431. This is an
appeal of a final judgment entered by the district court on October 16, 2014, which
denied in its entirety Appellants motion for attorneys fees pursuant to 26 U.S.C
7431(c)(3). (Joint Appendix (JA) at 383.) Appellant timely appealed the
judgment on December 15, 2014. (JA at 384.) This Court has jurisdiction pursuant
to 28 U.S.C. 1291.
Statement of the Issues Presented for Review
1.
Whether the district court abused its discretion in determining that Appellant
National Organization for Marriage was not a prevailing party because it did
not substantially prevail as to:
a.
b.
2.
Whether the district court abused its discretion in determining that the
position of Appellee United States of America, Internal Revenue Service
was substantially justified in the proceeding.
Statement of the Case
This case arises from a nonprofit groups extended pursuit of the truth
behind the shocking and unprecedented release of its confidential tax return to a
political opponent.
The National Organization for Marriage (NOM), a nonprofit organization
founded in 2007 to protect marriage and the faith communities that sustain it across
the United States, (JA at 11 8), must file a Form 990 annually with the Internal
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revealed markings on each page that NOM had not seen before; markings that
indicated that the document originated from within the IRS. (JA at 13 23.)
NOM quickly took action. It demanded that HRC and Huffington Post take
the document down. HRC complied. The Huffington Post did not. NOM urged the
Treasury Inspector General for Tax Administration (TIGTA) to investigate the
unauthorized disclosure, which it did. (JA at 17-18 46-52.) Despite the fact that
NOM requested and completely cooperated with the investigation, TIGTA did not
share any results or conclusions of its investigation with NOM. (JA at 18 52.)
Because it needed to know the cause of the disclosure in order to remedy its injury
and prevent future disclosures, NOM was forced to undertake significant and
costly efforts to obtain information about the illegal disclosure of its donor
informationincluding filing and administratively appealing five Freedom of
Information Act (FOIA) requests and one Privacy Act Request. Yet, in response
to those requests, TIGTA and the IRS consistently withheld completely or redacted
all information materially relevant to TIGTAs Investigation, including whether
the document originated from within the IRS. (JA at 18 53-55.) According to
TIGTA, 26 U.S.C. 6103 prohibited it from disclosing to NOM even the existence
of an investigation, let alone any information about the investigation. (JA at 20
63.)
NOM turned to its Congressional representatives for assistance with
3
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uncovering the truth. Yet even as details of the IRSs improper treatment of
conservative organizations were coming to light,1 NOM was unable to receive any
information as to the disclosure of its confidential information. (JA at 21 67-68.)
On October 3, 2013, after significant and costly efforts to find the truth
outside of the courtroom, NOM filed suit against the United States of America,
Internal Revenue Service (hereafter, the Government), seeking damages
pursuant to 26 U.S.C. 7431 for the unlawful inspections and disclosures of
NOMs tax return and tax return information by agents of the IRS in violation of
26 U.S.C. 6103.
In its Verified Complaint, NOM initially sought $1,000 in statutory damages
for each act of unlawful inspection or disclosure, or actual damages stemming from
related legal costs and lost donations in an amount not less than $60,500, plus
punitive damages for any intentional or grossly negligent acts of disclosure or
inspection. See 26 U.S.C. 7431(c). (JA at 30-31.) Early in the litigation, NOM
made the decision to revise its claim for actual damages. NOM dropped its claim
for damages related to lost donors and asserted its claims for expenses, costs, and
fees resulting from efforts to prevent further disclosure of its unredacted 2008
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Schedule B. After taking into account additional legal expenses resulting from the
disclosure, NOM revised its actual damages to $58,586.37.
Not until October 30, 201319 months after the unauthorized disclosure
did NOM learn the identity of the individual to whom its tax information was
disclosed. And, still, not from the Executive Branch. As part of its investigation
into the targeting of conservative applicants for tax-exempt status (JA at 26 8890), the House Ways and Means Committee revealed that the IRS disclosed the
document to Matthew Meisel, a former employee of Bain & Company, the
company where former Republican Presidential Candidate Mitt Romney (who was
associated with one of the disclosed NOM donors) served as interim CEO in the
early 1990s, (JA at 215 (referencing National Review Online article)). The House
Committee also revealed that Mr. Meisel provided NOMs unredacted 2008
Schedule B to HRC. (Id.)
On December 2, 2013, the Government filed its Answer. (JA at 37-58.) The
Government admitted that it disclosed NOMs unredacted 2008 Schedule B to a
third party in violation of 26 U.S.C. 6103, but denied that it was the cause of any
of NOMs actual damages, conceding liability for only the bare minimum $1,000
statutory damage amount. (JA at 49-50 78.) This was the first time that the
Government even acknowledged that the document came from within the IRS.
Following the close of discovery, the Government moved for summary
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judgment on all counts (Docket Entry 67), which NOM opposed, (Docket Entry
73).
On June 3, 2014, the district court granted the Governments Motion for
Summary Judgment as to NOMs unlawful inspection claim, and its request for
punitive damages. (JA at 350.) The Governments Motion was denied in all other
respects, including the Governments argument that NOM was not entitled to any
actual damages. (Id.)
On June 18, 2014, the parties filed the Joint Motion for Entry of Consent
Judgment (JA at 351-53), pursuant to which the parties agreed that NOM would
obtain a judgment against the Government in the amount of $50,000, inclusive of
NOMs claims for actual damages under 26 U.S.C. 7431(c)(1)(B)(i) and its
claims for costs of the action under 26 U.S.C. 7431(c)(2) (Docket Entry 86-1).
On June 24, 2014, this Court approved the Consent Judgment and retained
jurisdiction for purposes of resolving the matter of attorneys fees. (JA at 354.) On
July 25, 2014, NOM filed a motion for attorneys fees. The Government filed its
opposition on August 8, 2014, and NOM replied on August 15, 2014. The district
court denied NOMs motion in its entirety on October 16, 2014. (JA at 383.) NOM
timely appealed on December 15, 2014. (JA at 384.)
Summary of the Argument
Despite NOMs myriad efforts to obtain the information from the
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identity of the person who disclosed NOMs confidential donor dataas well as
the Governments liability for actual damages, when assessing the most significant
issues in the case. Second, when calculating the amount in controversy, the district
court abused its discretion by including actual damages that NOM voluntarily
dropped from the suit, nearly doubling the total actual damages and, subsequently,
nearly doubling the speculative punitive damages.
Further, the district court abused its discretion in finding that, even if NOM
substantially prevailed with respect to the most significant issue or to the amount in
controversy, it was not a prevailing party because the Governments position in the
proceeding was substantially justified. The district courts analysis here focused
entirely on whether the Government was justified in defending NOMs claims for
punitive damages and failed to examine whether the Governments position on
actual damages was justified. That failure was an error of law. The Government
was not substantially justified in completely disavowing liability for NOMs actual
damages resulting from the admitted unauthorized disclosure.
Because NOM substantially prevailed as to the amount in controversy and as
to the most significant issues presented and because the Government cannot show
that its position that it was not the cause of any of NOMs actual damages was
substantially justified, NOM is entitled to reasonable attorneys fees.
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Argument
Standard of Review
This Court reviews cases awarding or denying attorneys fees under section
7430 for an abuse of discretion. See Bowles v. United States, 947 F.2d 91, 94 (4th
Cir. 1991). A district court abuses its discretion when it acts arbitrarily or
irrationally, fails to consider recognized factors constraining its exercise of
discretion, relies on erroneous factual or legal premises, or commits an error of
law. United States v. Wilson, 624 F.3d 640, 649 (4th Cir. 2010) (citing United
States v. Delfino, 510 F.3d 468, 470 (4th Cir. 2007)). Although this is a deferential
standard, the Supreme Court obviously contemplate[s] a degree of deference
considerably short of a simple, accept-on-faith, rubber-stamping of district court
decisions on this issue. United States v. Paisley, 957 F.2d 1161, 1166 (4th Cir.
1992) (describing Supreme Courts standard in Pierce v. Underwood, 487 U.S. 552
(1988) as a careful, detailed review). This Circuit explains that it is inescapable
that honest, principled review under the traditional deferential standards may yet
require considerable appellate court effort that requires a substantial canvassing
of the relevant materials[.] Paisley, 957 F.2d at 1166 n.3. Further, [r]eview of the
conclusions of law underlying an award or denial of attorneys fees is de novo.
Marre v. United States, 117 F.3d 297, 301 (5th Cir. 1997) (citing Texas Food
Indus. Assn v. United States Dept. of Agric., 81 F.3d 578, 580 (5th Cir. 1996)).
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There is an additional requirement under Section 7430 that the party must
meet the requirements of 28 U.S.C. 2412(d)(2)(B), which, in part, limits
attorneys fees awards to incorporated entities that have fewer than 500 employees
and a net worth of $7 million or less at the time the civil action was filed. As the
district court found, (JA at 369 n.2), it is uncontested that NOM meets these
requirements and, therefore, this brief will focus on the substantially prevailed
requirement.
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v. U.S. Dept of Treasury, 804 F.2d 297, 300 (5th Cir. 1986)). Obtaining a victory
on the primary issue will suffice, and neither the amount of damages received nor
number of claims won is determinative. Wilkerson v. United States, 67 F.3d 112,
120 (5th Cir. 1995). Importantly for the present case, [t]he term substantially
prevailed . . . can be reasonably interpreted to refer to the final outcome of the
casewhether by court judgment or settlement. Cassuto v. Commr, 936 F.2d
736, 741 (2d Cir. 1991).
As the district court properly stated, the Complaint is [t]he starting point for
identifying the issues presented for litigation. (JA at 378 (quoting Christian Coal.
Intl, 133 F. Supp. 2d at 439).) An issue is the most significant if, despite
involving a lesser dollar amount than other issues, the issue objectively represents
the most significant issue for the taxpayer or the IRS. Don Johnson Motors, Inc.
v. United States, No. B-06-047, 2008 U.S. Dist. LEXIS 36594, *13 (S.D. Tex.
Mar. 14, 2008).
Rejecting NOMs statement of the most significant issue, the district court
found that this case was not brought to determine whether the IRS unlawfully
disclosed NOMs 2008 Form 990 Schedule B. (JA at 379.)3 But this conclusion
is contrary to the face of the Complaintwhich sought to have the Government
3
The district court did not clearly articulate what it believes the most
significant issue is, but it is clear it believes it to be related to NOMs arguments
concerning gross negligence and willfulness.
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declared liable for the unlawful release and made to pay damages. Both of which
occurred only as a result of NOM filing its complaint.4
In finding that NOM did not substantially prevail on the most significant
issue or set of issues, the district court abused its discretion by (1)
misapprehending the underlying case and (2) by failing to consider NOMs claims
for actual damages.
1.
The district courts logic appears to make the most significant issue
dependent upon the speed of success. For example, according to the district court,
because the Government acknowledged responsibility for the disclosure in its
Answer, the issue of liability must not be as significant as the issue of damages,
which the parties disputed for six additional months. But this logic puts a plaintiff
in the position of either forgoing resolution of other claims or forgoing attorneys
fees. Neither result is in the interest of justice.
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at 379 (citing Compl. 2).) To be sure, based on the information available to it,
including the fact that the Schedule B was first published by its political opponent
during a key election year, NOM reasonably believed that the disclosure of its
donor list was likely intentional or the result of gross negligence. (See JA at 10
2.) But the inclusion of those theories in the Complaint does not change the fact
that this lawsuit was pursued primarily to establish that the IRS was responsible for
the disclosure and subsequent publication of NOMs confidential donor list and to
recover damages related to its efforts to remedy the disclosure.
To cast this case as solely relating to willful or grossly negligent disclosure
ignores the twenty-seven paragraphs of the Complaint that discuss NOMs
expensive and extensive efforts over nearly two years to simply determine whether
the IRS made the disclosure, and who at the IRS was responsible for it (JA at 1722 45-71), as well as the eight paragraphs discussing the actual damages
sustained as a result of the disclosure, (JA at 14-15 29-36). NOMs actual
damages remained the same regardless of whether the disclosure was the result of
negligence, gross negligence, or willfulness.
Before and immediately after NOM filed the underlying action, the
Government stood between NOM and the truth by refusing to provide NOM with
any relevant details concerning TIGTAs investigation of the disclosure. The
Government even admits this fact. (See JA at 46 55 (The United States admits
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that TIGTA responded to Plaintiffs FOIA requests and has not produced records
regarding the underlying conclusions or specifics of its investigation.).) Not until
NOM filed the underlying action did the Government confirm that it disclosed
one copy of Plaintiffs 2008 Form 990 unredacted Schedule B to a single third
party in violation of law. (JA at 49-50 78.)
The district court found that [t]his case presented many significant issues,
separate and apart from the Governments admission as to the single inadvertent
disclosure[,] without articulating what those significant issues were. (JA at 378.)
And while there may have been other issues present, the fact remains that the
primary issues were assigning responsibility for the unauthorized disclosure and
awarding damages.5 Whether the Government released a nonprofits confidential
return informationand so is responsible for the resulting damageare significant
and important issues. And on those significant issues, NOM prevailed.
2.
The district courts finding that [t]he end result of this litigation is exactly
5
If the district court was concerned with the amount of time NOM spent on
unsuccessful issues, the remedy is through adjustment of the fee award rather than
disallowing fees altogether. For example, if the district court was not satisfied with
the substantial reductions NOM already made, it may consider each phase or issue
of the litigation discretely to determine whether the Plaintiff is entitled to recover
expenses incurred in pursuing that issue or litigating that phase. Christian Coal.
Intl, 133 F. Supp. 2d at 438-439 (citing Ragan v. Commn, 135 F.3d 329 (5th Cir.
1998)).
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what NOM already knew as early as December 2013, if not prior, (JA at 379),
further demonstrates that the court misunderstood the purpose of this case. In so
doing, the court simultaneously minimized the significance of NOMs victory and
gave excessive weight to the Governments Answer.
Contrary to the district courts implication, NOM did not discover all it
needed to know about the disclosure via the Governments Answer. When
cornered by NOMs Complaint, the Government finally did admit that it
disclosed one copy of Plaintiffs 2008 Form 990 unredacted Schedule B to a
single third party in violation of law, (JA at 49-50 78), but it did no more. It did
not provide NOM any details of the disclosure or assurances against future harm.
And, as will be described more thoroughly in the section on whether the
Governments position was substantially justified, the Government denied
responsibility for any of NOMs actual damages in its Answer. (See JA at 55 123
(The United States denies that it owes Plaintiff actual damages for an IRS
employees single inadvertent disclosure of Plaintiffs 2008 Form 990 unredacted
Schedule B.).)
Only in response to discovery requests during the pendency of this case did
the Government reveal any details concerning the results of TIGTAs
investigation. And at no time prior to settlement did the Government acknowledge
any liability for NOMs actual damages. In fact, the Government specifically
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denied liability and served intrusive and irrelevant discovery requests seeking
information and documents pertaining to NOMs fundraising efforts in order to
support its defense against responsibility for any actual damages. NOM
substantially prevailed on the issue of whether the IRSs unlawful disclosure was
the cause of its actual damages. (See JA at 352 3 (explaining that settlement
agreement resolves issue of actual damages caused by unlawful disclosure of 2008
Schedule B).) NOMs victory on the primary issue of liability for the disclosure
and a significant, related issue of responsibility for actual damages, both of which
were not settled in the Governments Answer, establishes that NOM substantially
prevailed for purposes of attorneys fees. See, e.g., Heasley, 967 F.2d at 122;
Wilkerson, 67 F.3d at 120.
B.
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The district court did cite Goettee v. Commr, 192 Fed. Appx. 212, 222 (4th
Cir. 2006), but it was for the first part of the sentence (the contention that the fee
award statute is to be construed in the Governments favor) rather than the second
part about punitive damages. Speculative punitive damages were not at issue in
Goettee.
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3.
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not quite 5 percent was recovered); Ralston Dev. Corp. v. United States, 937
F.2d 510, 515 (10th Cir. 1991) (same with regard to a 19 percent recovery); Don
Johnson Motors, Inc., 2008 U.S. Dist. LEXIS 36594 at 10 (same with regard to a
three-percent recovery); Smith v. United States, 735 F. Supp. 1396, 1400 (C.D.
Ill. 1990) (same with regard to $1,000 recovery where $6 million in compensatory
and punitive damages were sought, a recovery of .017%). Yet even in such cases,
an insubstantial award is not dispositive. Don Johnson Motors, Inc., 2008 U.S.
Dist. LEXIS 36594 at *10 (citing Farrar v. Hobby, 113 S. Ct. 566, 578 (1992)
(OConnor, J., concurring)).
NOMs recovery in this case was not disproportionally low. Mallas, 876
F. Supp. at 89. Though NOMs pleading initially sought $60,500 in actual
damages, that amount was reduced to $58,586.37 for reasons unrelated to the
merits of NOMs claims. NOM ultimately recovered $50,000 from the
Government (JA at 354), which constitutes a recovery of approximately 85 percent
of the pecuniary harm alleged to have been caused by the Governments unlawful
conduct. This is a substantial recovery. Reynoso v. United States, No. 10-00098,
2011 U.S. Dist. LEXIS 87929, 8 (N.D. Cal. Aug. 9, 2011) (Plaintiff thus
recovered eighty-one percent of the amount in controversy in this action and has
substantially prevailed under section 7430.).
Considering, for the sake of argument, the 1:1 punitive multiplier adopted by
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the district court, where the total amount in controversy would be $117,172.74,
NOMs recovery was almost 43 percent, still a substantial percentage of the total.
See Keeter v. United States, No. S-96-1755, 1998 U.S. Dist. LEXIS 12457, 5 (E.D.
Cal. Aug. 3, 1998) (fifty-five percent recovery deemed substantial).
Even if one accepts the district courts calculation of potential punitive
damages based on the original amount of actual damages sought plus the amount
of additional damages added during the litigation and excluding the amount of
actual damages dropped from the litigation, NOMs recovery was still 23 percent
of what was sought. (JA at 377.) That is exponentially larger than many of the
disproportionately low recoveries held to be not substantial, see supra (.017, 3,
and 5 percent recoveries not substantial).
In fact, a 23 percent recovery is more than the recovery of the plaintiffs in
Jones v. United States, 9 F. Supp. 2d 1154 (D. Neb. 1998). There, the plaintiffs
received just over $5 million dollars, which was only about 15 percent of what was
requested. Id. at 1157. Yet the court found that the recovery surely satisfies the
substantially prevailed language of the statute. Id. at 1160.
The district court made an error of law in determining that NOM did not
prevail as to the most significant issue or the amount in controversy. As such,
NOM was improperly denied prevailing party status.
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supported a claim for punitive damages if properly proven. (JA at 381.) The
district court engaged in no analysis as to whether the Government was
substantially justified in disavowing liability for any and all actual damages, an
argument the lower court, and another district court, Jones v. United States, 9 F.
Supp. 2d 1119 (D. Neb. 1998) (discussed below), faced little difficulty in rejecting,
Paisley, 957 F.2d at 1167-68. The rejection of those arguments also forced the
Government to settle the issue on unfavorable terms. Failure to conduct such an
analysis in light of the claims and supporting record evidence constitutes an abuse
of discretion. Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 295 (1st Cir.
2000) (An abuse occurs when a court, in making a discretionary ruling, relies
upon an improper factor, omits consideration of a factor entitled to substantial
weight, or mulls the correct mix of factors but makes a clear error of judgment in
assaying them.); see also Gunnells v. Healthplan Servs., 348 F.3d 417, 434 (4th
Cir. 2003) (court abused its discretion if it misunderstood or ignored
controlling legal principles). Based on the aforementioned objective indicia, the
Governments position was plainly unreasonable. Accordingly, this Court should
reverse the district court and hold that the Governments position was not
substantially justified. See Paisley, 957 F.2d at 1170 (conducting independent
analysis of substantial justification issue after holding that district court abused
its discretion).
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Although the relevant position of the Government is the one taken in the
proceeding 26 U.S.C. 7430(c)(4)(B)(i), the Court may consider the facts . . .
available at the time the IRS took its position, including pre-litigation actions . . .
that may have informed [the Governments] conduct during the litigation. Smith v.
United States, No. 3:09cv228 (JBA), 2011 U.S. Dist. LEXIS 22316, 10 n.1 (D.
Conn. Mar. 7, 2011) (quoting Estate of Baird v. Commr, 416 F.3d 442, 447 (5th
Cir. 2005)). Ultimately, [w]hether the governments position is not substantially
justified is necessarily a case-by-case, facts and circumstances determination.
Kenagy v. United States, 942 F.2d 459, 464 (8th Cir. 1991).
Section 7431 plainly contemplatesas this case exemplifiesthat a
particular plaintiff will pursue multiple theories of liability and pursue multiple
types of damages in a single action. In such a case, the Government will take
multiple legal positions in its defense, as it did here. Whether the Government was
substantially justified in a given action necessarily requires the court to assess
the reasonableness of each of the Governments positions. See Jones v. United
States, 9 F. Supp. 2d 1154, 1160-61 (separately analyzing governments position
with respect to (1) first liability trial; (2) second liability trial; (3) economic
damages; (4) emotional distress damages; and, (5) punitive damages), affd by
Jones v. United States, 207 F.3d 508, 513 (8th Cir. 2000).
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Notably, although the IRS claims that it admitted negligence in its Answer,
it actually denied the allegations in the preceding sentence. (JA at 52 102-03.) In
fact, the Government repeatedly referred to its actions as inadvertent, up to and
throughout its summary judgment motion. (See JA at 79-81, 86, 93-95, 98, 10105.)
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Fred Karger with the FPPC. Moreover, the Government knew that NOMs claimed
actual damages included legal expenses incurred by NOM in order to investigate
the disclosure caused by the IRS and to prevent HRC, Huffington Post, Fred
Karger and the FPPC from possessing and further publicizing NOMs confidential
donor information. (JA at 322 (NOM hired legal counsel to protect the
confidential donor information disclosed by Karger, and ultimately NOM was
absolved of any wrongdoing.).) Despite having this knowledge, the Government
offered NOM only $1,000 in statutory damages, (JA at 54-55 121), and wholly
denied that NOMs claimed actual damages were sustained . . . as a result of [the]
unauthorized . . . disclosure, 26 U.S.C. 7431(c)(1)(B)(i), made by IRS clerk
Wendy Peters, (JA at 101; see also JA at 55 123, 125.)
The Government maintained its position regarding actual damages
throughout discovery and presented it to the district court in its motion for
summary judgment motion. (JA at 101-07.) The district courts resolution of the
Governments arguments reveals its unreasonableness, and hence its lack of
substantial justification. Indeed, the district court rejected all of the Governments
arguments concerning actual damages, explaining, The Governments position
that it is not responsible, as a matter of law, for the costs associated with the
subsequent misuse of NOMs confidential taxpayer information is untenable on the
facts presented. (JA at 347 (emphasis added).) The district court had little
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trouble concluding that the unlawful disclosure of NOMs Schedule B was the
actual cause of its claimed damages. (JA at 342 (emphasis added)); see also
Paisley, 957 F.2d at 1168. While the issue of proximate cause was a closer call,
the district court found that the Governments position was legally unsustainable,
explaining that it was certainly foreseeable that releasing NOMs Schedule B to a
member of the media could result in its publication, and that NOM would take
legal action to prevent further harm. (JA at 345) (emphasis added).)
This district courts analysis stands in stark contrast to that in Paisley, where
this Court held that the Governments position was substantially justified despite
being rejected by Supreme Court. That was because the issue was sufficiently
difficult and prompted two separate, fairly lengthy, opinions, each of which
demonstrates a perception by the author that the issue was one whose resolution
required significant intellectual effort, careful analysis of relevant interpretive
sources, and sophisticated applications of traditional canons of statutory
construction. Paisley, 957 F.2d at 1168. Here, the district court rejected the
Governments position with relative ease and had little difficulty resolving the
issue of actual damages in NOMs favor.
According to the district courts analysis, the Governments position with
respect to actual damages did not have a reasonable basis both in law and fact.
Pierce, 487 U.S. at 565. Based on the facts known to the Government prior to the
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summary judgment motion, the Government should have known its position on
actual damages was untenable. It was therefore not substantially justified. Mallas,
876 F. Supp. at 89 (where the court rejected all the arguments presented by the
Government and it was clear that the Government disclosed return information
in violation of the statute, the Governments position was not substantially
justified.).
The lack of substantial justification for the Governments position is
reinforced by the views of other courts on the strength . . . of the Governments
position Paisley, 957 F.2d at 1166, that is, existing precedent in which the
Government lost on substantially similar issues, see Jones v. United States, 9 F.
Supp. 2d 1119. While the Court is only mandated by statute to consider losses on
substantially similar issues in courts of appeals for other circuits, 26 U.S.C.
7430(c)(4)(B)(iii), Jones v. United States nevertheless demonstrates that the
Government should have known its position was substantially unjustified prior to
filing its motion for summary judgment. Cf. Snider v. United States, 468 F.3d 500,
511 (8th Cir. 2006) (affirming a district court holding that the governments
position was not substantially justified where, after close of discovery, the
government should have realized . . . [its] position was not substantially justified).
As the district court explained, Jones illustrates the general position . . .
that misuse of taxpayer information by third parties is one of the kind of
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position, Pierce, 487 U.S. at 568 (emphasis added), the reasons for settlement
here are plainly obvious: this Court rejected the Governments position with
respect to causation and actual damages. The Governments willingness to settle
on unfavorable terms after its argument was rejected thus provides further evidence
that its position was not substantially justified.
Conclusion
For the foregoing reasons, NOM is a prevailing party, and is entitled to
reasonable attorneys fees. The judgment to the contrary by the district court
should be reversed, and the district court directed to consider NOMs reasonable
attorneys fees request.
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No. 14-2363
_______
[]
8,277
this brief contains
[state number of] words, excluding the parts of
the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii), or
[ ]
2. Typeface and Type Style Requirements: A proportionally spaced typeface (such as Times
New Roman) must include serifs and must be 14-point or larger. A monospaced typeface
(such as Courier New) must be 12-point or larger (at least 10 characters per inch).
This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type
style requirements of Fed. R. App. P. 32(a)(6) because:
[]
[ ]
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04/13/2012
SCC
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CERTIFICATE OF SERVICE
I hereby certify that I electronically filed the foregoing Appellants Opening
Brief with the Clerk of the Court for the United States Court of Appeals for the
Fourth Circuit by using the appellate CM/ECF system on March 4, 2015. I further
certify that all participants in the case are registered CM/ECF users and that service
will be accomplished by the appellate CM/ECF system.
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Addendum
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(3)
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