Jeffrey G. Sharp v. United States

ON MOTION

LOURIE, Circuit Judge.

ORDER

On December 28, 1994, this court affirmed a decision of the United States Court of Federal Claims granting summary judgment in favor of taxpayer Jeffrey G. Sharp on his claim for a tax refund and denying the United States’ cross-motion for summary judgment. Sharp v. United States, 14 F.3d 583 (Fed.Cir.1993). On January 26, 1994, Sharp filed an application to the court in accordance with Federal Circuit Rule 47.7(b)(2) for attorney fees under 26 U.S.C. § 7430 (1988).

An award of attorney fees and expenses is authorized by § 7430 of Title 26 as follows: “[i]n any ... court proceeding which is brought by or against the United States in connection with the ... refund of any tax, interest, or penalty ... the prevailing party may be awarded a judgment [for] reasonable litigation costs incurred in connection with such court proceeding.” 26 U.S.C. § 7430(a) (1988). In order to be a “prevailing party” within the meaning of § 7430, a taxpayer must establish that “the position of the United States in the proceeding was not substantially justified.” 26 U.S.C. § 7430(c)(4) (1988). The Supreme Court, considering the meaning of the term “substantially justified” in the context of an award of attorney fees against the government, stated that “substantially justified” conveys the connotation “justified to a degree that could satisfy a reasonable person.” See Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550, 101 L.Ed.2d 490 (1988).

Sharp contends that the government’s position in Sharp was unreasonable and contrary to court precedent. Sharp points out that at the time the government’s appeal in Sharp was filed, one circuit court had rejected the government’s position when it reversed- a decision by the Tax Court in favor of the government. Beyer v. Commissioner, 916 F.2d 153 (4th Cir.1990).¹ While a string of losses can indicate an unreasonable position, “the fact that one other court agreed or disagreed with the Government does not establish whether its position is substantially justified.” Pierce, 487 U.S. at 569, 108 S.Ct. at 2552. In fact, at the time the appeal was filed, at least one court had agreed with the government’s position. Beyer v. Commissioner, 92 T.C. 1304, 1989 WL 66555 (1989). Only one circuit court had disagreed. Beyer v. Commissioner, 916 F.2d 153 (4th Cir.1990). These facts support a conclusion that the government’s position was “justified to a degree that could satisfy a reasonable person.” See Pierce, 487 U.S. at 565, 108 S.Ct. at 2550. With an argument that had substance to it, it was not unreasonable for the government to proceed to appeal in another forum.

Sharp has not established that the position of the United States in Sharp was not substantially justified. Thus, he has not shown himself to be a “prevailing party” within the meaning of § 7430. Accordingly, IT IS ORDERED THAT:

Sharp’s application for attorney fees be denied.

1 . Furthermore, ten days before the government’s appeal in Sharp was filed, a district court entered a decision rejecting the government’s position. Flood v. United States, 845 F.Supp. 1367 (D.Alaska 1993), appeal docketed, No. 93-35429 (9th Cir. Filed May 3, 1993). Also, after the Sharp appeal was filed, the Tax Court reversed the position it took in Beyer and adopted (with six dissenting judges) the reasoning of the Fourth Circuit against the government. Lenz v. Commissioner, 101 T.C. No. 17, 1993 WL 393870 (1993).