Opinion
13611-22
12-21-2023
RICHARD W. MEDLEY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Adam B. Landy, Special Trial Judge.
This deficiency case is before the Court on the following motions: (1) the Commissioner's Motion for Partial Summary Judgment, filed November 18, 2022; (2) Robert E. Barnes' Motion to Withdraw as Counsel for Petitioner, filed December 15, 2022; (3) Mr. Medley's Motion for Discovery, filed February 9, 2023; (4) Mr. Medley's Motion to Allow Access to Dawson Support, filed March 16, 2023; and (5) Mr. Medley' Motion for Discovery, filed May 30, 2023. For the reasons stated below, we will grant the Motion to Withdraw. Also, we will allow Mr. Medley, pursuant to Rule 41(a), to file an Amended Petition and Amended Reply to Answer to properly respond to the Commissioner's affirmative allegations raised in the Answer. The remaining four motions will remain under advisement.
Background
The following background facts are derived from the pleadings, the parties' motions, and the supporting exhibits attached thereto. We note that the background facts are stated solely for the purpose of ruling on the pending motions and are not finding of facts. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). Mr. Medley resided in Virginia at the time the Petition was filed. Absent stipulation to the contrary, this case is appealable to the U.S. Court of Appeals for the Fourth Circuit. See § 7482(b)(1)(A).
On June 16, 2022, Mr. Medley, by and through his counsel, electronically filed a Petition seeking a redetermination of deficiencies and additions to tax, pursuant to sections 6651(a)(1), 6651(f), and 6654, for taxable years 2012, 2013, and 2016 (the "Taxable Years at Issue"). The Petition only assigned errors related to taxable year 2012. On August 3, 2022, the Commissioner filed his Answer affirmatively alleging, in paragraphs 8(a) through 8(rr), that Mr. Medley's failure to timely file income tax returns for the Taxable Years at Issue was due to fraud. On September 29, 2022, Mr. Barnes late filed a Reply to Answer for Mr. Medley which the Court recharacterized on October 3, 2022, as petitioner's Motion for Leave to File Out of Time Reply to Answer Embodying Reply to Answer and lodged therewith the Reply to Answer. Same day, the Court granted the Motion for Leave and filed the Reply to Answer. The Reply to Answer, prepared by counsel for Mr. Medley, only denied paragraphs 8(nn), 8(pp), and 8(qq) in the Commissioner's Answer. Since counsel for Mr. Medley failed to expressly admit or deny every affirmative allegation in the Answer, the remaining undenied affirmative allegations were deemed admitted by operation of Rule 37(c).
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.
On November 18, 2022, the Commissioner filed a Motion for Partial Summary Judgment seeking partial summary adjudication in his favor regarding Mr. Medley being liable (1) for income tax deficiencies and additions to tax, including the addition to tax pursuant to section 6651(f), for taxable years 2013 and 2016 and (2) for the additions to tax for taxable year 2012 after the deficiency in income tax is determined with respect to that taxable year, all based on the deemed admissions. By Order served November 11, 2022, the Court ordered Mr. Medley to file a Response to the Commissioner's Motion on or before December 14, 2022. On December 15, 2022, Mr. Barnes filed a Motion to Withdraw stating that "[s]trategic and financial adversity between [Mr. Barnes] and Mr. Medley exist to such an extent that representation cannot continue." On December 16, 2022, the Court received and filed a Response from Mr. Medley, postmarked on December 12, 2022, and on his own behalf, detailing the communication issues he has allegedly experienced with his counsel of record and generally disputing the deficiencies in income tax and additions to tax for the Taxable Years at Issue.
On January 9, 2023, the Commissioner filed a Response to the Motion to Withdraw stating that he "does not seek to interfere with the attorney-client relationship between [Mr. Medley and Mr. Barnes] or the termination thereof." The Commissioner acknowledged that Mr. Barnes' motion presents concerns for him regarding the posture of this case. The Commissioner does object to Mr. Medley's reliance on the withdrawal of Mr. Barnes to seek relief from the deemed admissions. On February 3, 2023, and as supplemented on February 7, 2023, Mr. Medley filed a Response to the Motion to Withdraw, as supplemented, stating his medical issues which presumably is the reason he hired legal counsel, the communication issues with Mr. Barnes as his legal counsel, including timely responses to this Court, and the legal and economic harm he will likely experience if he is unable to properly respond to the Commissioner's affirmative allegations stated in the Answer.
Discussion
I. Motion to Withdraw as Counsel for Mr. Medley by Robert E. Barnes
An attorney of record may not withdraw as counsel from a case unless the requirements of Rule 24(c) are met. Mr. Barnes' motion states that he notified his client of the contemplated withdrawal, and the motion provides the Court with Mr. Medley's contact information. Mr. Barnes' motion complies with Rule 24(c).
Rule 24(c) does not provide any standards for deciding when it is appropriate for counsel to withdraw. Fry v. Commissioner, 92 T.C. 368, 372 (1989). "In considering whether to grant the instant motion to withdraw under Rule 24(c) we must balance the interests of all those affected, including [Mr. Medley, the Commissioner, Mr. Barnes] and the Court. A decision on such a question necessarily turns upon the facts and circumstances present in each particular case." Id. at 375. Such a decision has ethical implications which should be considered in order to maintain harmony between our Rules and the American Bar Association's Model Rules of Professional Conduct (Model Rules). See id. at 372-73; Rule 201 ("Practitioners before the Court shall carry on their practice in accordance with the letter and spirit of the Model Rules.").
Although the Court has limited information as to the impetus for the Motion to Withdraw other than because of "strategic and financial adversity", it is apparent that the attorney-client relationship is broken and likely irreparable. As discussed below, the Court will endeavor to ensure that Mr. Barnes' withdrawal can be accomplished without any material adverse effect on Mr. Medley and his legal interests moving forward. See Model Rules of Prof'l Conduct r. 1.16 (Am. Bar Ass'n 2020). Therefore, we will grant Mr. Barnes' Motion to Withdraw as Counsel for Mr. Medley.
II. Amended Pleadings
Rule 41(a), in pertinent part, provides that "a party may amend a pleading only by leave of Court or by written consent of the adverse party, and leave shall be given freely when justice so requires." This rule reflects "a liberal attitude towards amendment of pleadings." Shang v. Commissioner, T.C. Memo. 2008-69, 2008 WL 724034, *1 (citation omitted). Permitting a litigant to amend a pleading is within the sound discretion of the Court. Zenith Radio Corp. v. Hazeltine Rsch., Inc., 401 U.S. 321, 330 (1971); Foman v. Davis, 371 U.S. 178, 182 (1962); Estate of Quick v. Commissioner, 110 T.C. 172, 178 (1998), supplemented by 110 T.C. 440 (1998); Law v. Commissioner, 84 T.C. 985, 990 (1985). An important factor in deciding whether to permit an amended pleading is the existence of unfair surprise or prejudice to the nonmoving party. Estate of Quick, 110 T.C. at 178-80; Law, 84 T.C. at 990. "The question of prejudice is whether the addition of those new issues by a later amendment, rather than by inclusion in the initial pleading, creates an unfair disadvantage to the other party." Cardiovascular Center, LLC v. Commissioner, T.C. Memo. 2023-64, *6 (citing Ax v. Commissioner, 146 T.C. 153, 168-69 (2016)).
The entire record in this case shows that Mr. Medley has been inadequately represented by Mr. Barnes. For the issues related to section 6651(f) for the Taxable Years at Issue, the Commissioner bears the burden of proof and production. See § 7454(a); Rule 142(b). However, this case is not currently set for trial in Richmond, Virginia. Thus, the Commissioner will have ample time to respond to any amended pleadings filed by Mr. Medley and to properly develop his trial strategy. The Commissioner will also have ample time to conduct informal and formal discovery to meet his burden of proof with clear and convincing evidence.
There is no prejudice or unfair disadvantage to the Commissioner if the Court provides Mr. Medley, now a self-represented litigant, with the opportunity to file an Amended Petition to assign errors to taxable years 2013 and 2016, in addition to taxable year 2012, and to file a proper Reply to Answer responding to each of the affirmative allegations listed in paragraphs 8(a) through 8(rr) of the Commissioner's Answer. Given the liberality of Rule 41(a), the circumstances of this case do not meet the requisite prejudice or delay to justify preventing Mr. Medley from amending his pleadings, and as such, we will permit Mr. Medley to file amended pleadings.
The premises considered, it is
ORDERED that in addition to regular service on the parties, the Clerk of the Court shall serve a copy of this Order on Mr. Medley at: 12033 Moriah Hill Lane, Culpeper, Virginia 22701. It is further
ORDERED that the Clerk of the Court shall change Mr. Medley's address of record to the mailing address listed in the previously ordered paragraph. It is further
ORDERED that the Motion to Withdraw as Counsel for Petitioner, filed December 15, 2022, is granted, and Robert E. Barnes is withdrawn as counsel for Mr. Medley. It is further
ORDERED that, on or before January 10, 2024, Mr. Barnes shall turn over to Mr. Medley all items in his case file related to this docketed case and the Taxable Years at Issue. It is further
ORDERED that, on or before January 17, 2024, Mr. Barnes shall file a report, by paper service to the Court, Mr. Medley, and counsel for the Commissioner, explicitly stating whether he has complied with this Order. It is further
ORDERED that, on the Court's own motion pursuant to Rule 41(a), Mr. Medley may file an Amended Petition and Amended Reply to Answer in this case. It is further
ORDERED that, on or before February 14, 2024, Mr. Medley may file an Amended Petition and Amended Reply to Answer pursuant to Rule 37. Failure to file amended pleadings may result in the Court granting the Commissioner's Motion for Partial Summary Judgment. It is further
ORDERED that the Court will hold the remaining four motions in abeyance pending Mr. Barnes' compliance with and Mr. Medley's response to this Order.
The Court encourages all litigants to register for electronic access (eAccess) so that they may electronically file and view documents in their Tax Court cases. If you currently file in paper and/or receive paper service from the Court, you are encouraged to register for eAccess by emailing dawson.support@ustaxcourt.gov.
Mr. Medley is reminded of possible assistance available to respond to this Order and any other issues through low-income taxpayer clinics which can be found on the Court's website at https://www.ustaxcourt.gov/clinics.html and a list is also attached to this Order.