FedEx Ground Package System, Inc. II v. Dept. of Rev. , 20 Or. Tax 547 ( 2012 )

No. 60 July 17, 2012 547
IN THE OREGON TAX COURT
REGULAR DIVISION
FEDEX GROUND PACKAGE SYSTEM, INC.,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant.
(TC 4923 & 4924)
Plaintiff (taxpayer) appealed notices of deficiency assessment from Defendant
(the department) as to withholding tax, and sought a judgment with regard to
the status of its service providers on the issue of whether they were employees
or independent contractors. At a preliminary status hearing, the department
announced that it had abated the assessment and filed a motion to have the case
dismissed as moot. Taxpayer objected to the motion, requested a ruling declaring
taxpayer’s service providers were independent contractors, and moved for a hear-
ing as to award of attorney fees. Granting the department’s motion to dismiss and
denying taxpayer’s motion for fees, the court ruled that the department’s abate-
ment meant that any further proceedings in the matter would have no effect on
the tax liability of taxpayer for the tax year at issue, and therefore the matter was
no longer justiciable.
Oral argument on Defendant (the department)’s motion
to dismiss was held January 9, 2012, in the courtroom of the
Oregon Tax Court, Salem.
Larry J. Brant and David L. Canary, Garvey Schubert
Barer PC, Portland, filed the response and argued the cause
for Plaintiff (taxpayer).
Sheila H. Potter, Senior Assistant Attorney General,
Department of Justice, Salem, filed the motion and argued
the cause for Defendant (the department).
Decision for Defendant rendered July 17, 2012.
HENRY C. BREITHAUPT, Judge.
This matter is before the court on the motion of
Defendant Department of Revenue (the department) to dis-
miss this case. Plaintiff (taxpayer) opposes the motion.
This case was specially designated to the Regular
Division. Thereafter discovery and motions were dealt with
and the parties proceeded to prepare for trial in January of
548 FedEx Ground Package System, Inc. v. Dept. of Rev.
this year. The issue for trial was the status of some of the
persons who drive and deliver packages in connection with
taxpayer’s business. The department asserted that these
persons were employees. Taxpayer asserted that these per-
sons were independent contractors. The tax assessment at
issue was for the 2008 tax year.
The parties and the court acknowledged that the
status of each individual driver was or could be at issue as
the question of the status of a driver would or could depend
on the particular facts and agreements applicable to that
driver individually. Nonetheless, the parties were preparing
to proceed to trial on a sample of such drivers. The parties
told the court that the outcome of that trial could well lead
to settlement of the disputes about other drivers covered by
the assessment.
On November 9, 2011, at a hearing called to con-
sider other matters, the department announced that it had
abated the assessment and would take no action to renew
the assessment for the 2008 year. The department has sup-
ported this assertion with a declaration submitted in con-
nection with the motion it filed to have this case dismissed
as moot.
In its opposition to the motion to dismiss filed by the
department, taxpayer did not insist on a trial or object to
the abatement. It, in effect, accepted the “surrender” of the
department but urged the court to proceed with a hearing to
allow it to establish that there is a factual basis for its claim
for attorney fees. Taxpayer also seeks a ruling from this
court that all of taxpayer’s service providers, not just the
service providers in question in this case, were independent
contractors. Perhaps recognizing that its requested relief—
determination that the assessment was invalid in whole or
in part—has been practically obtained, taxpayer also moves
for leave to amend its complaint to request declaratory relief
in respect of the 2008 year.
The department first asserts that its actions have
rendered this case moot and non-justiciable. In support of
this position the department relies on Numrich v. Dept. of
Rev., 17 OTR 402 (2004). The department also relies on other
Cite as 20 OTR 547 (2012) 549
Oregon cases in which cases have not survived a mootness
challenge on the basis that attorney fee awards might be
available. See Kay v. David Douglas Sch. Dist. No. 40, 303
Or 574, 738 P2d 1389 (1987); Keeney v. University of Oregon,
178 Or App 198, 36 P3d 982 (2001); Charles Wiper Inc. v.
City of Eugene, 235 Or App 382, 232 P3d 985 (2010).
This court has consistently held that where there
is no possibility of a practical effect on the tax liability of
a taxpayer, a case is rendered non-justiciable such that the
court is divested of jurisdiction.1 This was true not only in
Numrich, but is also a rule consistently applied in property
tax cases arising under Measure 50 where the real market
value position asserted by a taxpayer, even if correct, would
lead to no actual current reduction in the tax on the prop-
erty. See, e.g., Paris v. Dept. of Rev., 19 OTR 519 (2008). In
this case, the abatement effected by the department and its
undertakings presented to the court lead to the conclusion
that any further proceedings in this matter will have no
effect on the tax liability of taxpayer for the year that is at
issue in this case.2
The rulings of this court are fully consistent with
the governing precedent of Kay. Kay applies directly and
taxpayer has cited no Oregon case indicating otherwise. In
Kay, the relief requested was no longer practically available
at the time the trial court entered its judgment, either on
the merits or on a fee award. Kay, 303 Or at 579. The Oregon
Supreme Court concluded the trial court should have dis-
missed the case. Id.1
The decisions often speak in terms of a plaintiff not having standing under
the statutes that support the jurisdiction of this court. That distinction is, how-
ever, one without a difference as lack of standing has the same jurisdictional
effect as mootness. See Henry C. Breithaupt and Jill A. Tanner, The Oregon Tax
Court at Mid-Century, 48 Willamette L Rev 147, 156 (2011).
2
The parties and the court have recognized throughout this proceeding that
the only liability before the court is that for tax year 2008. The court cannot and
will not consider what may, or may not, be true for later or different years. Those
questions are simply not before the court. Additionally, the facts and law for other
periods may be different. The issue in this case is inherently factual—a reality
that also leads the court to conclude that this is not a case where anyone could
conclude that any wrong, even if one existed, would be capable of repetition or
would have collateral consequences. In any event, Oregon does not follow the rule
of “capable of repetition but evading review.” Yancy v. Shatzer, 337 Or 345, 363,
97 P3d 1161 (2004).
550 FedEx Ground Package System, Inc. v. Dept. of Rev.
Taxpayer argues that the decisions of this court in
Ellison v. Dept. of Rev., 20 OTR 256 (2011) and Hill v. Dept.
of Rev., 17 OTR 409 (2004) support a conclusion that the
court can continue to address the attorney fees matter. They
do not. Hill was an attempt by a plaintiff to dismiss a case
after a counterclaim had been pleaded. Hill, 17 OTR at 411.
The rules of the court do not permit unilateral dismissal in
such situations. See TCR 54(A)(1). That is a different pos-
ture than presented in this case. Ellison presented a simi-
lar situation in which the plaintiff’s motion to dismiss was
denied as being untimely. Ellison, 20 OTR at 257. Neither
Ellison nor Hill is a basis for this court to act in contraven-
tion to the clear rule of Kay.
Even if the court remained with jurisdiction to con-
tinue with this case, the court sees no reason why the motion
to amend the complaint should be granted. Again, any such
amendment could, at most, raise the question of the status
of the workers as to the 2008 year—the very questions that
have now been conclusively resolved. Facts or law as to other
periods are not before the court and may not ever be before
the court.
Finally, even if the court had jurisdiction to consider
an attorney fee award, the sources of legal right to such fees
upon which taxpayer relies require either an unreasonable
position to have been taken by the department, some disobe-
dience of an order by the department, or some false state-
ment or improper behavior by counsel for the department.
Nothing that has so far occurred in this litigation objec-
tively supports a finding that any of these predicate facts or
actions is present or has occurred.3
The court sees no objective basis for a conclusion
that anything it or its counsel did in this case was improper.
Taxpayer, however, requests a hearing be held for the pur-
pose of establishing that the purposes of the department in
abating the assessment at issue were improper. That action
is not warranted. This case involves a relatively common
3
Taxpayer has asserted that its efforts in resisting the department led to the
abatement and therefore it is entitled to a fee award. Oregon does not however
follow that so-called “catalyst” doctrine. Clapper v. Oregon State Police, 228 Or
App 172, 206 P3d 1135 (2009).
Cite as 20 OTR 547 (2012) 551
dispute between persons in the position of taxpayer and
revenue or other departments of government. The matters
are inherently and intensively factual. Critical facts develop
over time. Parties must evaluate their litigating positions
as facts develop. In the face of developing or developed facts
and, perhaps, other factors, a party may decide to “fold.”
Absent a provision in a statute or the rules of the court that
prevent that, such as existed in Ellison and Hill, a party is
permitted to take the action the department took.4
The motion to dismiss filed by the department is
granted. Counsel for the department is directed to prepare
an appropriate form of judgment or advise the court if the
form previously supplied is the form to be considered by the
court. Now, therefore,
IT IS ORDERED that Defendant Department of
Revenue’s Motion to Dismiss All Claims as Moot is granted;
and
IT IS FURTHER ORDERED that Plaintiff’s Motion
for Attorney Fees is denied.
4
Further, the court cannot imagine that the quest on which taxpayer hopes
to embark would not run immediately and continually into evidentiary problems
related to evidentiary privileges. The court sees no purpose, or requirement, to
embark on such a quest.