Fournier v. United States

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E. HAFFNER FOURNIER, JOANNE D. FOURNIER,
JOAN HEARLEY (INDIVIDUALLY AND AS
TRUSTEE OF THE HEARLEY FAMILY TRUST),
KEVIN P. REGAN, SHARON M. REGAN, ROBERT L.
SPERLING, DARLENE J. SPERLING, JEFFREY
STRUIKSMA AND CYNTHIA STRUIKSMA,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
2012-5056
Appeal from the United States Court of Federal
Claims in case no. 06-CV-933, Judge Thomas C. Wheeler.
ROBERT G. MARTIN AND BERNICE V. MARTIN,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
2012-5057
FOURNIER v. US 2
Appeal from the United States Court of Federal
Claims in case no. 03-CV-2272, Judge Edward J. Damich.
IRA H. BARRY, JANE E. BARRY, WADE E. BOGGS,
DEBORAH A. BOGGS, THOMAS V. CHOREY, JR.,
BETTYE JEANNE CHOREY, DONALD HOLLY,
ROSEANNE HOLLY, CHARLES H. JOHNSON, KAY
A. JOHNSON, EDWARD J. MATONICH, JUDITH R.
MATONICH, LAWRENCE R. SPIETH, ANNE T.
SPIETH, THOMAS STAUFFACHER, LINDA
STAUFFACHER, RICHARD L. WAKENIGHT AND
PATRICIA R. WAKENIGHT,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
2012-5071
Appeal from the United States Court of Federal
Claims in case no. 03-CV-200, Senior Judge Eric G. Brug-
gink.
ON MOTION
Before RADER, Chief Judge, LOURIE and SCHALL, Circuit
Judges.
SCHALL, Circuit Judge.
3 FOURNIER v. US
ORDER
The United States moves to summarily affirm these
federal tax cases relating to taxation of partnership
transactions based on this court's prior decisions in
Keener v. United States, 551 F.3d 1358 (Fed. Cir. 2009)
and Prati v. United States, 603 F.3d 1301 (Fed. Cir. 2010).
The government's motion is opposed by the taxpayers.
The taxpayers in these suits invested in several lim-
ited partnerships sponsored by American Agri-Corp.
(AMCOR) in the 1980s that were targeted by the Internal
Revenue Service as illegal tax shelters. In 1990 and 1991,
the IRS issued notices of final partnership administrative
adjustments (FPAA), disallowing the deductions attribut-
able to the AMCOR partnerships and demanding that the
partners pay the resulting deficiencies.
Representative partners filed suit in the United
States Tax Court. Among the issues litigated was
whether the adjustments were barred by the statute of
limitations. While the Tax Court proceedings progressed,
some partners chose to settle with the IRS, while other
partners agreed to be bound by the Tax Court's statute of
limitations determination in representative test cases.
In 2000, the Tax Court rejected the statute of limita-
tions defense in the test cases, finding that one of the
partnerships had failed to file a valid partnership return
and that the other four had validly agreed through their
tax matters partners ("TMP") to extend the time period
pursuant to LR.C. § 6229(b). Subsequently, the Tax
Court entered stipulated decisions in all of the partner-
ship cases. The IRS subsequently assessed additional
interest against the partners under LR.C. § 6621(c) for
substantial underpayment of income tax attributable to
tax-motivated transactions.
FOURNIER v. US 4
Mter paying the taxes, the partners brought tax re-
fund cases in the United States Court of Federal Claims,
asserting entitlement to a tax refund on the grounds that
the assessments were made after the statute of limita-
tions had expired, and the assessment of interest under
section 6621(c) was improper because the partnership
transactions were not tax-motivated transactions.
Of those cases, 77 were assigned to the same trial
court judge. The trial court held that it lacked jurisdic-
tion over the refund claims because the taxpayers were
prohibited by statute from bringing an action for a refund
attributable to partnership items, and both claims, includ-
ing the statute of limitations claim, were partnership
items that should have been challenged in the partner-
ship-level proceeding instead of in partner-level proceed-
ings. Those jurisdictional conclusions have since been
affirmed by this court.
Mter disposing of the common jurisdictional issues,
the trial court entered judgment in these cases, dismiss-
ing the taxpayers' complaints. The taxpayers filed a
motion for reconsideration requesting that the judgments
be vacated. The court denied that motion, but vacated the
judgments in 17 cases, these cases among them, to allow
the taxpayers to present additional case-specific claims.
In granting that portion of the motion, however, the trial
court stated that it was vacating the judgments only "for
the limited purpose of allowing plaintiffs to pursue any
unresolved, case-specific claims that may still be out-
standing."
The cases were then reassigned to different judges.
Although the taxpayers here originally suggested there
were case-specific claims outstanding, they subsequently
dropped or waived those claims, and moved again for
5 FOURNIER v. US
consideration on the issues of the statute of limitations
defense and penalty interest. Those motions were denied.
These appeals followed.
The Court of Federal Claim's jurisdiction over part-
nership tax refund actions is limited by statute. Pursuant
to the Tax Equity and Fiscal Responsibility Act of 1982
("TEFRA"), Pub. L. No. 97-248, § 402(a), 96 Stat. 648, the
tax treatment of "partnership items" is determined in a
single partnership-level proceeding, and section 7422(h) of
the Internal Revenue Code enforces that principle by
prohibiting partners from bringing individual actions "for
a refund attributable to partnership items[.]"
In Prati and Keener, we held that statute of limita-
tions claims and challenges as to whether section 6621(c)
interest should have been assessed as sham transactions
are "partnership items," and thus the taxpayers were
required to raise the claims in the partnership level
proceeding. Prati, 603 F.3d at 1306. Since the claims
here are indistinguishable from those in Prati and Keener,
the trial judges' rulings that section 7422(h) bars these
taxpayers from asserting their section 6621(c) interest
and statute of limitations claims in these refund proceed-
ings are clearly correct as a matter oflaw.
In arguing against summary affirmance, the taxpay-
ers contend that the Tax Court had no jurisdictional
authority to allow them to participate in the partnership-
level Tax Court suits and raise their claims earlier. But
this argument was addressed and rejected by this court in
Prati. There, we explained that even before the statutory
amendment in 1997, tax partners could have participated
in partnership level proceedings. Prati, 603 F.3d at 1307
n.4 ("[T]he 1997 amendment merely codified prior practice
in the Tax Court; the appellants, as individual partners,
FOURNIER v. US 6
were therefore free to participate in the partnership-level
proceedings to litigate the statute of limitations issue.").
The cases on which the taxpayers rely that were de-
cided after Prati are not to the contrary, because they do
not address the Tax Court's authority to allow individual
partners to participate in a timely filed partnership-level
proceedings. See A.I.M. Controls, LLC v. Comm'r of
Internal Revenue, 672 F.3d 390 (5th Cir. 2012) (time
period for filing petition within TEFRA's express filing
period is jurisdictional); see also Henderson ex rel. Hen-
derson v. Shinseki, _ U.S. _, 131 S. Ct. 1197, 1202-03
(2011) (directing courts to decide whether statutory filing
periods are jurisdictional based on Congressional intent).
Because the tax partners could have raised these claims
during the Tax Court proceedings, we agree with the
government that their attempts to distinguish themselves
from the taxpayers in Prati and Keener are without merit.
Finally, the taxpayers contend that they are not
bound by the prior rulings, calling this court's attention to
an affidavit of Mr. Behrens, the TMP who apparently
negotiated the stipulated decisions in the Tax Court. Mr.
Behren's affidavit states in relevant part that: "The IRS
sought to have me concede the transactions were shams.
I refused." The affidavit further purports to explain that
his intent behind entering into the "Stipulation to be
Bound" in the Tax Court was not to bind other partner-
ships in relation to specific statute of limitations claims.
To the extent that the taxpayers are relying on Mr.
Behren's affidavit to dispute that the transactions were
tax motivated, this court has already rejected those lines
of argument as directed to the nature of the partnership
transaction and therefore barred by section 7422(h) from
being raised before the Court of Federal Claims. See
Prati, 603 F.3d at 1308-09. To the extent that the tax-
7 FOURNIER v. US
payers contend that Federal Claims erred in denying
their motion for reconsideration in light of Mr. Behrens'
affidavit, we discern no abuse of discretion in the trial
court's determination. Notably, the trial court judges
explained that as chairman of AMCOR, Behrens was
readily available to provide his statements earlier in the
proceedings, yet he did not do so. The judges further
explained that the affidavit was self-serving and thus did
not provide a proper basis for reconsideration.
We therefore agree with the government that the
judgments of the Court of Federal Claims should be
summarily affirmed. See Joshua v. United States, 17 F.3d
378, 380 (Fed. Cir. 1994) (Summary affirmance of a case
"is appropriate, inter alia, when the position of one party
is so clearly correct as a matter of law that no substantial
question regarding the outcome of the appeal exists.").
Accordingly,
IT Is ORDERED THAT:
(1) The judgments of the Court of Federal Claims are
summarily affirmed.
(2) Each side shall bear its own costs.
FOR THE COURT
NOV 21 2012 /s/ Jan Horbaly
Date Jan Horbaly
Clerk
cc: Thomas E. Redding, Esq.
Steven K. Uejio, Esq.
FILED
s19 u.s.THE FEDERAl. C!RCUITFOR
COURT OF APPEALS
NOV 272012
JAN HORBAlY
CLERK