Cavoto v. Hayes
2011 U.S. App. LEXIS 3810
| 7th Cir. | 2011Background
- Hayes filed a Form 1099-C discharging a $30,000 debt she claimed Cavoto owed; Cavoto disputes the debt and sues under § 7434(a) claiming fraudulent information return.
- District court held the Form 1099-C was not fraudulent and Hayes was entitled to $30,000 after a bench trial.
- The Form 1099-C prompted Cavoto to face potential additional taxes; IRS ceased further collection, but Cavoto pursued § 7434 litigation anyway.
- Evidence showed Cavoto and Hayes had an agreement that Cavoto would repay Hayes if he received funds, prompting the district court to credit Hayes’ belief she was cancelling a bona fide debt.
- On appeal, Cavoto argues the Form 1099-C was fraudulent and seeks reversal; the district court’s breach finding also is challenged; the Seventh Circuit affirms the district court’s result on § 7434 and breach, and rejects the § 7434 claim as outside the statute’s scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Cavoto's § 7434 claim lies | Cavoto contends 1099-C is fraudulent information return | Hayes' filing was not fraudulent so long as the data were accurate | Claim dismissed; § 7434 covers nine enumerated returns, not 1099-C. |
| Whether the district court properly found Hayes breached | Cavoto argues credibility issues undermine the breach finding | Hayes credibly proved breach under the loan agreement | Affirmed breach finding; credibility determinations not reversed absent clear error. |
| Whether appeals court should reverse for ineffective assistance | Ineffective assistance warrants retrial | No retrial as a remedy in civil § 7434 action | Argument frivolous; no remand. |
Key Cases Cited
- Mikulski v. Centerior Energy Corp., 501 F.3d 555 (6th Cir. 2007) (private right of action under § 7434 limited to listed returns)
- Colonial Sav. Ass'n & Subsidiaries v. Comm'r, 854 F.2d 1001 (7th Cir. 1988) (debt discharge taxing and reporting framework; Form 1099-C context)
- Xodus v. Wackenhut Corp., 619 F.3d 683 (7th Cir. 2010) (appellate review of credibility determinations; not reversible absent clear error)
- Anderson v. City of Bessemer City, 470 U.S. 564 (1985) (standard for reviewing fact-finder credibility; deferential review)