MyMail Ltd., A Texas L.P. v. Commissioner IRS

Case: 11-41311 Document: 00512055137 Page: 1 Date Filed: 11/15/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 15, 2012
No. 11-41311 Lyle W. Cayce
c/w No. 12-40908 Clerk
MYMAIL LIMITED, A TEXAS LIMITED PARTNERSHIP,
Plaintiff-Appellant
v.
COMMISSIONER OF THE INTERNAL REVENUE SERVICE,
Defendant-Appellee
Appeals from the United States District Court
for the Eastern District of Texas
USDC No. 6:09-CV-273
Before STEWART, Chief Judge, GARZA, and ELROD, Circuit Judges.
PER CURIAM:*
Plaintiff MyMail appeals the district court’s grant of summary judgment
for the Commissioner of the Internal Revenue Service (“Commissioner”) and the
district court’s denial of MyMail’s motion to supplement the record on appeal.
The district court found there was no genuine issue of material fact and held the
United States was entitled to judgment as a matter of law. The district court
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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denied MyMail’s motion to supplement the record on appeal. For the following
reasons, we AFFIRM.
The Commissioner sent a Notice of Final Partnership Administrative
Adjustment (“FPAA”) to MyMail (a limited partnership), adjusting partnership-
level items on MyMail’s 2005 income tax return. In the FPAA, the
Commissioner increased MyMail’s gross receipts by $4,457,054, that portion of
a $11,300,000 settlement paid directly to MyMail’s attorneys as a contingency
fee that MyMail did not report as income.1 The Commissioner also rejected
MyMail’s currency fee deduction, which MyMail claimed based on the difference
between the face value and market value of coins distributed to its partners.
MyMail filed a timely petition in the district court objecting to both of the
Commisioner’s changes to MyMail’s partnership return, arguing it was entitled
to two deductions from its $11,300,000 settlement: $4,457,054 for attorney’s fees
and $3,150,164 for currency fees.
The parties then filed cross motions for summary judgment. MyMail and
the Commissioner both represented to the court that there were no material
facts in dispute. After mediation the parties submitted an Agreed Partial
Judgment to the Court on the attorney’s fee issue, agreeing the computational
adjustment would be zero for the attorney’s fee issue. The parties then
submitted the remaining issue through summary judgment.
In support of its motion for summary judgment the Commissioner
submitted five exhibits, all authenticated in an affidavit by its own trial counsel:
(1) MyMail’s 1065 Form reporting as its gross receipts only the net of the
litigation proceeds, (2) a copy of wire transfer records showing the transfer of
1
The Commissioner contends the proper tax treatment would have been to report the
entire $11,300,000 in gross receipts and then to claim as a business expense the $4,457,054
in attorney’s fees. I.R.C. § 162(a) (2006).
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$11,300,000 in litigation proceeds to MyMail (3) MyMail’s amended 1065 Form
including MyMail’s deduction for the “currency fee,” (4) the FPAA issued to
MyMail for the 2005 tax year, and (5) e-mail correspondence between counsel for
the Commissioner’s and MyMail’s counsel. The Commissioner’s trial counsel
represented the first four items all came from “IRS administrative files.”
MyMail did not object to the admission of these exhibits as evidence.
The district court granted summary judgment for the Commissioner on the
currency fee issue. MyMail appealed and filed a motion to supplement the
record on appeal with the district court. MyMail sought to supplement the
record with “gold clause contracts” related to the claimed currency fee deduction.
The district court denied MyMail’s motion to supplement the record on appeal.
MyMail moved for reconsideration of the district court’s denial of its motion to
supplement the record on appeal. In its motion for reconsideration, MyMail
stated there were no factual issues in dispute and the sole issue in dispute was
whether MyMail was entitled to a currency fee deduction. In its motion, MyMail
submitted the following facts:
MyMail is a limited partnership established pursuant to
Texas law. The Defendant Commissioner (“CIR”) asserts, with
agreement from MyMail, that in 2005, MyMail settled a patent
infringement case with Internet service provider AOL, and the
phone companies of AT&T and Verizon. The total amount of this
settlement, $11,300,000, was paid to MyMail’s patent litigation
counsel, a Dallas law firm named McKool Smith. That law firm
received a contingency fee of $4,457,054 for representing MyMail in
that litigation, and distributed the sum of $6,842,946 by wire
transfer to MyMail’s bank.
The district court denied MyMail’s motion for reconsideration of its order
denying MyMail’s motion to supplement the record on appeal.
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MyMail also filed a motion to supplement the record on appeal with this
court. The Commissioner filed an opposition and we denied that motion. During
the pendency of its first appeal, MyMail filed a second appeal contending the
district court erred in denying MyMail’s motion to supplement the record in the
first appeal. The Commissioner filed a motion for summary affirmance in the
second appeal, and requested the motion be submitted along with the panel in
the first appeal. We issued an order consolidating MyMail’s second appeal with
the first appeal. Therefore, both appeals are now before us.
We review the grant of summary judgment de novo, applying the same
standard as the district court. Stotter v. Univ. of Texas at San Antonio, 508 F.3d
812, 820 (5th Cir. 2007). We construe facts in the light most favorable to the
non-moving party and draw all reasonable inferences in its favor. Id. A party
is entitled to summary judgment only if the evidence in the record shows that
there is no genuine dispute as to any material fact and that the moving party is
entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). We review a
district court’s denial of a motion to supplement the record on appeal under the
abuse-of-discretion standard. Performance Autoplex II Ltd. v. Mid–Continent
Cas. Co., 322 F.3d 847, 854 (5th Cir. 2003).
The only substantive issue on summary judgment was the allowability of
MyMail’s claimed currency fee deduction. On appeal MyMail does not challenge
the court’s ruling on the merits; therefore MyMail waived its right to appellate
review of that issue and we do not address it here. Succession of McCord v.
Comm’r., 461 F.3d 614, 623 n.17 (5th Cir. 2006) (citation omitted) (“[A] party
who fails to raise an issue in its brief waives the right to appellate review of that
issue”). Even assuming MyMail had not waived its right to appeal the merits of
the currency fee deduction issue, courts have long held that such arguments are
frivolous. See, e.g., Mathes v. Comm’r, 576 F.2d 70, 70-71 (5th Cir. 1978) (citing
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Juilliard v. Greenman (The Legal Tender Cases), 110 U.S. 421, 448 (1884))
(holding attempt of taxpayers to reduce their reported income by approximately
40% based on statutes defining the United States dollar as either a specific
weight of gold or silver coin was not lawful method for taxpayers to reduce their
tax liability).
MyMail’s central contention is that the district court erred in granting
summary judgment to the Commissioner because the exhibits the Commissioner
attached to its motion for summary judgment were improperly authenticated.
See FED. R. CIV. P. 44; FED. R. EVID. 902. Because MyMail raises this objection
for the first time on appeal, MyMail must show the district court’s admission of
the exhibits was plain error. Puckett v. United States, 556 U.S. 129, 135 (2009).
To succeed on plain error review MyMail must show (1) the district court made
an error (2) that is clear and obvious (3) that affects appellant’s substantial
rights (4) we should exercise our discretion to correct the error because the error
seriously affects the fairness, integrity, or public reputation of judicial
proceedings. Id.The Commissioner does not allege the exhibits were properly
authenticated. The Commissioner instead contends plain error review is
irrelevant and unnecessary because the disputed exhibits merely provided
underlying documentation for undisputed facts. The Commissioner maintains
sufficient evidence corroborating the disputed exhibits exists in the attachments
to MyMail’s petition, MyMail’s motion to supplement the record, and the district
court’s order entering an agreed partial judgment, to make MyMail’s plain error
allegation irrelevant.
Even if the district court committed an obvious error by admitting the
Commissioner’s summary judgment exhibits, we hold the error did not affect My
Mail’s substantial rights because it did not affect the outcome of the proceedings.
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See Puckett, 556 U.S. at 135. MyMail alleges the district court could not have
granted summary judgment for the Commissioner but for the claimed error.
MyMail repeatedly represented to the district court, however, that there is no
issue of material fact in dispute and the only issue in dispute is a legal one:
whether MyMail is entitled to a “currency fee” deduction. MyMail cites Portillo
v. Comm’r., 932 F.2d 1128 (5th Cir. 1991) for the proposition that IRS forms are
insufficient to prove the receipt of business income in tax court proceedings, but
unlike in that case the facts regarding MyMail’s receipt of business income are
not in dispute. Because MyMail does not allege any of the information in the
Commissioner’s summary judgment exhibits is false or untrustworthy,
remanding this case to the district court to require the Commissioner to
authenticate the summary judgment exhibits would not change the outcome of
the proceedings. As such, MyMail failed to show the error affected its
substantial rights or that we should correct the error.
Because the “gold clause contracts” MyMail seeks to supplement the
record with are not relevant to our disposition of the appeal, we hold the district
court did not abuse its discretion by denying MyMail’s motion to supplement the
record on appeal.2
For these reasons, we AFFIRM.
2
After we entered an order consolidating both appeals, MyMail filed a motion to file
an opening brief to address its motion to supplement. Because we have disposed of the
consolidated appeal in this opinion, we DENY that motion as moot.
6