Kovacs v. United States
739 F.3d 1020
7th Cir.2014Background
- Kovacs filed for bankruptcy in July 2001 and received a discharge in October 2001.
- IRS later applied part of Kovacs’s 2000 tax refund to debts from 1990–1995 that had been discharged.
- IRS later sent two September 2003 letters stating Kovacs still owed for 1990–1995, despite Mulcahy’s prior discharge confirmation.
- Kovacs and counsel did not challenge the September letters at the time, reviewing them only superficially.
- In January 2005 Kovacs filed an administrative claim under 26 U.S.C. § 7430(b)(1) and then an adversary proceeding in August 2005 (Kovacs I).
- The bankruptcy court awarded $3,750 in litigation costs on remand after a long procedural history restricting recovery by the statute of limitations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether law-of-the-case controls damages earlier awarded | Kovacs argues Kovacs I’s damages ruling is law of the case | Kovacs II–V vacated and remanded; law-of-the-case not binding | No; Kovacs I was vacated and does not control on remand |
| Whether award was §7430 litigation costs or §7433 damages | Kovacs contends the award was for §7433 damages not subject to §7430 cap | IRS contends award fell under §7430 costs with a $150/hour cap | Award rested on §7430 costs, not §7433 damages |
| Whether Kovacs may recover for the entire litigation given prevailing-party status | Kovacs seeks full litigation costs for the entire suit | Limitation period confines recoverable costs, per Kovacs V and statute | Recovery limited to $3,750; limitations bar broader recovery |
Key Cases Cited
- Kovacs v. United States, 614 F.3d 666 (7th Cir. 2010) (remand and damages limited to 2003 letters; law-of-the-case aspects clarified)
- Webb v. Bd. of Educ. of Dyer Cnty., Tenn., 471 U.S. 234 (1985) (pre-litigation services can be 'in connection with' litigation)
- Pennsylvania v. Del. Valley Citizens' Council for Clean Air, 478 U.S. 546 (1986) (fee-shifting standard for reasonable fees)
- Hensley v. Eckerhart, 461 U.S. 424 (1983) (prevailing-party fee considerations and extent of hours warranted)
- Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010) (public-interest fee considerations in capstone awards)
- John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008) (limitations on sovereign immunity and jurisdictional aspects of statutes)
- Sebelius v. Auburn Reg. Med. Ctr., 133 S. Ct. 817 (2013) (non-jurisdictional administrative remedies exhaustion timeline)
- United States v. Parker, 101 F.3d 527 (7th Cir. 1996) (scope of remand and time-bar considerations)