Opinion
3823-19 4421-19
11-29-2023
ROYALTY MANAGEMENT INSURANCE COMPANY, LTD., ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber, Judge.
By Order served November 21, 2023, we granted respondent's Motion to Strike a portion of petitioners' post-trial answering brief because it failed to comply with our instructions. Later that day petitioners filed a Response to Motion to Strike requesting that "this Court immediately reconsider its Order." We will recharacterize petitioners' document as a Motion for Reconsideration of Order and deny it as such.
These "micro-captive" insurance cases were tried between February 14 and 22, 2023, in Oklahoma City, Oklahoma. At the end of trial the Court set a briefing schedule, with simultaneous opening briefs due July 24, 2023, and simultaneous answering briefs due September 22, 2023. In a colloquy with the parties, the Court provided explicit instructions regarding the contents of the post-trial briefs.
The Court directed that the parties' opening briefs should follow the usual Tax Court pattern, with proposed Findings of Fact followed by an Argument section. See Rules 150(e)(3), (5).[ However, the Court directed that "the answering briefs shall be confined to any opposition to the other party's Proposed Findings of Fact," specifying that the Court did not want "any legal discussion in the answering briefs." The Court reiterated that directive moments later, stating, "I don't want any additional legal analysis in the answering briefs."
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
The parties timely filed their simultaneous opening briefs. Respondent's brief complied with the Court's instructions, setting forth his "Request for Findings of Fact" at pages 7-114 and his "Arguments" at pages 120-215. Respondent's requested Findings of Fact are set out in 392 numbered paragraphs, each with citations to record evidence relied upon in support of the proposed finding.
Petitioners' opening brief did not comply with our instructions or with this Court's Rules. Rule 150(e)(3) provides that all briefs shall contain (among other things) the following:
Proposed findings of fact . . . based on the evidence in the form of numbered statements, each of which shall be complete and shall consist of a concise statement of essential fact . . . . In each such numbered statement, there shall be inserted references to the pages of the transcript or the exhibits or other sources relied upon to support the statement.
Petitioners' opening brief did not contain any proposed Findings of Fact, in numbered paragraphs or otherwise. Rather, after reciting the "Issues Presented," petitioners' opening brief proceeds immediately to a section captioned "Argument and Authorities," which occupies the remaining 95 pages. Many factual assertions are embedded in the Argument section, often without any citations to record evidence. Petitioners' attorneys are members of the Bar of this Court and are charged with knowledge of this Court's Rules. See Brumley v. Commissioner, 1998-424, 76 T.C.M. (CCH) 935, 938 ("Attorneys admitted to practice before our Court are presumed to know our Rules of Practice and Procedure . . . .")
On September 21, 2023, respondent filed his simultaneous answering brief. Because petitioners in their opening brief had not included any requested Findings of Fact, respondent objected to the factual assertions embedded in the Argument section of that brief. Respondent captioned this portion of his answering brief, "Respondent's Objections to Factual Statements Made in Petitioners' Opening Brief," and followed that section with his "Conclusion." As instructed by the Court, respondent included no legal argument in his answering brief.
On September 22, 2023, petitioners filed their simultaneous answering brief. The opening portion of their brief responds to the Commissioner's proposed Findings of Fact, as the Court directed. But the next 62 pages, beginning at page 73 and captioned "Response to IRS' Argument," consist entirely of legal argument. The final 6 pages, captioned "Conclusion," likewise consist entirely of legal argument. The inclusion of this legal argument defied the Court's explicit instructions regarding the contents of the post-trial answering briefs.
On November 13, 2023, respondent filed a Motion to Strike the latter portion of petitioners' answering brief. Because petitioners' inclusion of the legal argument section violated our unambiguous instructions, we granted respondent's Motion on November 21 without requesting a response from petitioners. We directed petitioners to file, within 21 days, an amended answering brief that complied with our post-trial directives.
In their Motion for Reconsideration petitioners advance two arguments, neither of which is persuasive. First, they assert that respondent's Motion to Strike "is time barred" by Rule 52 because the Motion was not filed within 30 days after petitioners filed their answering brief. Rule 52 provides that "the Court may order stricken from any pleading [among other things] any insufficient claim or defense." Rule 52 is chiefly concerned with the contents of pleadings, not post-trial briefs. In any event, Rule 52 explicitly provides that, "upon the Court's own initiative at any time," the Court may order stricken "any redundant, immaterial, [or] impertinent matter" from any document filed with the Court, including "any . . . objectionable matter from briefs." Because the Court explicitly directed that no legal argument was to be included in the post-trial answering briefs, petitioners' inclusion of legal argument in their post-trial answering brief was both "impertinent" and "objectionable." Rule 52 authorizes the Court to strike such material, with or without a motion by the opposing party.
Second, petitioners assert that respondent "is not prejudiced" by the contents of their answering brief. But respondent is plainly prejudiced. By including 68 pages of rebuttal legal argument in their answering brief, while respondent (having complied with our instructions) included none, petitioners are upending the level playing field contemplated by our Rules. We expect parties who litigate in this Court to respect the judicial process. The even-handed enforcement of our Rules serves the just, speedy, and inexpensive determination of all cases that come before us. See Rule 1(b); see also § 7453.
If we did not strike the offending portion of petitioners' answering brief, respondent would be obliged to seek leave to file a supplemental brief replying to petitioners' 68 pages of rebuttal argument. But that too would prejudice respondent, forcing him to expend considerable time that his attorneys could devote to other matters. And pursuing that path would enable petitioners unilaterally to dictate the terms on which post-trial briefs would be filed, in defiance of the Court's directives to the contrary.
For these reasons, it is
ORDERED that petitioners' document, filed November 21, 2023, is recharacterized as petitioners' Motion for Reconsideration of Order. It is further
ORDERED that petitioners' Motion for Reconsideration of Order, filed November 21, 2023, is denied. It is further
ORDERED that petitioners shall file, by December 11, 2023, an amended answering brief that complies with the Court's post-trial instructions by omitting the legal argument appearing at pages 73-141 of their original answering brief.