Opinion
No. 99-CV-415S
March 7, 2002
DECISION AND ORDER
1. On August 14, 2001, Magistrate Judge Leslie G. Foschio issued a Report and Recommendation in which he recommended, inter alia, that Defendants' Motion for Summary Judgment be denied and Plaintiff's Motion for Summary Judgment be granted.
2. On November 16, 2001, Defendants timely filed objections to Judge Foschio's Report and Recommendation. On February 4, 2002, Plaintiff filed a response in opposition to Defendants' objections. On February 22, 2002, Defendants filed a reply to Plaintiff's response. On March 15, 2002, this Court held oral argument on Defendants' objections.
This Court granted motions to extend the time for filing objections on August 23 and October 16, 2001.
3. At oral argument before this Court, Plaintiff asserted that its primary argument in support of its Motion for Summary Judgment and in opposition to Defendants' Motion for Summary Judgment is that ¶ 5 of the Stipulation does not bind Plaintiff to assess Defendants within the same time frame as Harold and Lila Chapin ("the Chapins"), the named taxpayers in the Controlling Case.
Paragraph 5 of the Stipulation provides the following:
A decision shall be submitted in this case [Defendants' case] when the decision in the CONTROLLING CASE (whether litigated or settled) becomes final under I.R.C. § 7481.
Plaintiff contends that the sole purpose of its use of controlling cases is to bind taxpayers with common issues to the same result, not to assess the covered taxpayers within the same time frame as the named taxpayers chosen for the Controlling Case.
Defendants' position is that the clear language of ¶ 5 binds Plaintiff to assess Defendants within the same time frame applicable to the Chapins.
4. Plaintiff raised this argument before Judge Foschio in its papers in support of its Motion for Summary Judgment (Docket No. 17) at pages 9-13. However, while the Report and Recommendation discusses the validity of the Stipulation in general, see Report and Recommendation at 12-14, and identifies the issue of whether Plaintiff is bound to assess Defendants within the same time frame as the Chapins, see Report and Recommendation at 14-15, it does not directly examine whether the terms of ¶ 5 of the Stipulation contractually bind Plaintiff to assess Defendants within the same time frame as the Chapins. Instead, the Report and Recommendation examines the issue in the context of ¶ 3 of the Stipulation and discusses whether "other issues" remained outstanding in Defendants' Tax Petitions at the time the decision in the Controlling Case was final. See Report and Recommendation at 15-21.
Paragraph 3 of the Stipulation provides in pertinent part:
issues involving the above adjustment(s) shall esolved as if the petitioners in this case were same as the taxpayers in the CONTROLLING CASE.
5. In light of the fact that Judge Foschio does not appear to have addressed this issue directly, this Court initially considered returning this case for issuance of a Supplemental Report and Recommendation. See 28 U.S.C. § 636(b)(1) (upon de novo review of a Report and Recommendation, district judge may recommit matter to the magistrate judge with instructions); FED. R. Civ. P. 72(b) (same). However, because this Court finds that the outcome of the case would be the same regardless of the binding effect of ¶ 5, it will adopt Judge Foschio's Report and Recommendation with the following modification set forth herein.
Even if this Court, after reviewing a Supplemental Report and Recommendation, were to find that ¶ 5 of the Stipulation bound Plaintiff to assess Defendants within the same time frame as the Chapins, Defendants' position would not improve because this Court adopts Judge Foschio's Report and Recommendation regarding Plaintiff's alternate position that outstanding tax issues falling outside of the Stipulation prevented Plaintiff from assessing Defendants until final resolution of those issues.
6. At pages 15-20 of the Report and Recommendation, Judge Foschio discusses the existence of other issues pertaining to Defendants' Tax Petition that fall outside the scope of the Stipulation. As part of his analysis, Judge Foschio relies on a letter from Defendants' former counsel ("the Campbell letter"), and a motion to withdraw filed by Defendants' former counsel ("the Fuzak motion"). See Report and Recommendation at 18-20. Defendants argue that this is inadmissible hearsay evidence, and object to Judge Foschio's consideration of this evidence as a ground for finding that other issues outside of the Stipulation existed at the time the Controlling Case decision became final.
7. Without expressing an opinion as to the admissibility of this evidence, this Court relies on additional documentary evidence contained in the record to support the finding that other issues existed such that Plaintiff was prevented from assessing Defendants within the time frame applicable to the Chapins. In addition to ¶ 3 of the Stipulation, the three Special Consent Forms 872-A, and the Defendants' Tax Court Petitions discussed in the Report and Recommendation, see Report and Recommendation at 15-18, this Court finds that additional documentary evidence of record establishes that assessment would not have been proper within the time frame beginning after the Controlling Case became final.
As an example, documentary evidence contained in the record establishes that unresolved issues existed in connection with Defendants involvement in TGN Associates Coal and QPL Associates Coal Program. See, e.g., Appendix to Defendant's Motion for Summary Judgment ("Defendants' Appendix") at A0171-72, A0330, A0212, A0218. Neither of these partnerships was covered by the Stipulation. In fact, the preamble to the Stipulation specifically notes that the Stipulation is limited to "all adjustment(s) in respondent's notice(s) of deficiency relating to Lighthouse Hill Associates and Coal Duck-80 Associates." Accordingly, it is clear that the unresolved issues relating to TGN Associates Coal and QPL Associates Coal Program were not governed by the Stipulation or resolved by the Control Case decision.
8. In conclusion, this Court accepts the Report and Recommendation with modification to emphasize that this Court places greater weight on the documentary evidence cited and discussed above that establishes the existence of outstanding issues falling outside the scope of the Stipulation, than on the Campbell letter and Fuzak motion. In all other respects, including the timing and manner of assessment, this Court hereby adopts Judge Foschio's Report and Recommendation, including the authorities cited and the reasons given therein.
IT HEREBY IS ORDERED, that Judge Foschio's August 14, 2001 Report and Recommendation (Docket No. 30) is adopted with modification.
FURTHER, that Defendants' Motion for Summary Judgment (Docket No. 6) is DENIED.
FURTHER, that Plaintiffs Motion for Summary Judgment (Docket No. 14) is GRANTED.
FURTHER, that Plaintiff's assessments against Defendants are reduced to judgments.
FURTHER, that Defendants are hereby directed to provide Plaintiff with an accounting of all of the assets in Mrs. Reece's estate.
FURTHER, the Clerk of the Court is directed to take the necessary steps in which to close this case.
SO ORDERED.