Marré v. United StatesMarré v. United States
- Reporters:
- , , , ,
- Before:
- W. Eugene Davis, Reavley, DeMoss
Richard L. Marré (“Marré“) and Agritech Enterprises, Inc. (“Agritech“) sued the United States under
I.
In 1981, Marré founded Agritech Enterprises, Inc. (“Agritech“) to build solar-heated greenhouses in Ellis and Waller Counties, Texas. The greenhouses were sold as tax shelters to limited partnerships and individual investors. Most of the limited partnerships were formed by financial planners in California, who served as general partners.
In 1985, Internal Revenue Service (“IRS“) Special Agent Lindell Parrish began a criminal investigation of both Marré and Agritech for allegedly aiding and assisting in the filing of false tax returns in violation of
As part of the investigation, Parrish interviewed various Agritech investors, promoters, suppliers and employees. He also sent form letters, referred to as “circular letters,” to the investors and certain suppliers. In the interviews and letters, Parrish disclosed that Marré and Agritech were under investigation by the Criminal Investigation Division of the IRS for allegedly aiding and assisting in the filing of false tax returns relative to the greenhouses. In the circular letters to the investors, Parrish also assured the investors that Marré was the sole target of the investigation and warned that any deductions taken for the greenhouses would be fraudulent. An attached questionnaire included two statements that indicated Marré had been dishonest with the investors in representing that he would furnish complete greenhouses.
Marré and Agritech sued the United States under
The court also held that Agritech was not entitled to damages because it had ceased doing business before the disclosures were made. It concluded that an award of damages to Agritech would amount to a double recovery for Marré, Agritech‘s sole owner. Finally, the court held that Marré was entitled to recover reasonable litigation costs, including attorney‘s fees, under
Marré and Agritech appeal the district court‘s damage award to Marré and its rejection of Agritech‘s claim. The government cross-appeals the amount of attorney‘s fees awarded to Marré. The government also filed a motion to dismiss Marré and Agritech‘s appeal as premature.
II.
The government contends that the lack of a separate, written order renders the appeal premature under
The Seventh, Ninth and Eleventh Circuits have recognized this distinction and do not require a separate, written order for the denial of a post-trial motion. See Wright v. Preferred Research, Inc., 937 F.2d 1556, 1560-61 (11th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 915, 116 L.Ed.2d 815 (1992); Hollywood v. City of Santa Maria, 886 F.2d 1228, 1230-31 (9th Cir.1989); Charles v. Daley, 799 F.2d 343, 347 (7th Cir.1986). We agree with this approach and deny the government‘s motion to dismiss.
III.
A.
On the merits, Marré argues first that the district court erred in not awarding him actual damages for his alleged mental suffering. Marré maintains that he presented unrefuted evidence of mental suffering and emotional anguish that resulted from the unauthorized disclosures. Marré presented evidence that Parrish‘s disclosures damaged his reputation, caused him emotional stress which led to his divorce, and limited his future employment opportunities.
[t]he evidence of actual damages is simply not there. The demise of Agritech was pretty much a fait accompli long before Parrish began his rampage through the IRS regulations; the evidence shows that many months before the events complained of, Agritech‘s income had dried up and no more greenhouses were being sold; in fact, several investors had already sued Marré. Thus we cannot find that Parrish‘s misdeeds scuttled Marré‘s dreams of commercial success. Nor can we find that the collapse of Marré‘s marriage should be laid to Parrish‘s door.
We, of course, review findings of fact for clear error. See Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985).
The district court did not find Marré‘s damage evidence sufficiently credible to support an award of actual damages. We give great deference to the trial court‘s credibility determinations, and “[w]here there are two permissible views of the evidence, the factfinder‘s choice between them cannot be clearly erroneous.” Id. at 574, 105 S.Ct. at 1511. The district court did not err in denying Marré‘s claim for actual damages.
B.
Marré argues next that the district court erred in holding that it was precluded from awarding punitive damages in the absence of actual damages. Section 7431(c) of the Internal Revenue Code provides:
(c) Damages—In any action brought under subsection (a), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the sum of—
(1) the greater of—
(A) $1,000 for each act of unauthorized disclosure of a return or return information with respect to which such defendant is found liable, or
(B) the sum of—
(i) the actual damages sustained by the plaintiff as a result of such unauthorized disclosure, plus
(ii) in the case of a willful disclosure or a disclosure which is the result of gross negligence, punitive damages, plus
(2) the costs of the action.
Marré contends that the plain language of the statute permits recovery of punitive damages
We leave undecided the statutory interpretation question because we are convinced that the evidence is not sufficient to support a punitive damage award even if recoverable. The statute authorizes a punitive damage award only if the disclosures are willful or grossly negligent. To resolve this question, our task is to determine whether the record would support a finding that Parrish made the disclosures without ground for believing that they were lawful or with a reckless disregard of Marré and Agritech‘s rights. See Rodgers v. Hyatt, 697 F.2d 899, 906 (10th Cir.1983); Malis v. United States, 59 A.F.T.R.2d 87-988, 1986 WL 15721 (C.D.Cal.1986). While the record supports, and the government does not dispute, the district court‘s findings that Marré was entitled to statutory damages, it does not reveal conduct by Agent Parrish so egregious as to warrant an award of punitive damages.
Marré contends that several of Parrish‘s disclosures were willful or grossly negligent. Marré points first to Parrish‘s disclosure in the interviews and letters that the IRS was conducting a criminal investigation of Marré and Agritech for aiding and assisting in tax fraud through marketing and promoting the greenhouses. We found no cases where such a disclosure drew a punitive damages award. Cf. Diamond v. United States, 944 F.2d 431 (8th Cir.1991) (holding that disclosure in circular letter that agent was a criminal agent investigating taxpayer‘s tax liability was a good faith, but erroneous, interpretation of
Marré next complains of additional disclosures made by Parrish to the investors, which suggested that Marré was guilty of wrongdoing in advising the investors to take deductions for incomplete greenhouses. Parrish stated in the circular letters that the IRS believed that Marré had caused the investors to file false returns and that the IRS was not investigating the investors for those returns. In the questionnaire attached to the letters, Parrish also stated:
33. I can assure you that the most that you have ever had during the years 1982, 1983 and 1984 could best be described as framing for a solar greenhouse. You have never had an operable solar pond. You have never had anything close to what was described in the promotion material.
34. How do you feel about Marré remaining silent and not telling you the truth about the true condition of you [sic] invesement [sic].
In dealing with the investors, Agent Parrish faced the difficult task of securing their cooperation. Parrish needed testimony from the investors about Marré‘s role in persuading them to invest in the tax shelter. Because the investigation concerned Marré‘s role in causing the investors to claim false tax deductions, the investors were understandably reluctant to talk to Parrish for fear of implicating themselves. In fact, the IRS was actively auditing many of the investors at the time.
Parrish testified that he first attempted to interview a number of the investors in person. Many refused to take his calls, failed to show up for appointments, or brought along counsel who demanded to know more before allowing their clients to talk. In some cases, Parrish issued summons to those investors who refused to meet with him. Ultimately, Parrish decided that it would be more efficient to send circular letters to a large number of the investors.
The record does not support a finding that Parrish‘s disclosures were a flagrant violation of
C.
Agritech, a corporation owned entirely by Marré, argues that the district court erred in denying it recovery. The district court stated that because Agritech was “dead in the water” and “little more than a corporate corpse,” it refused to “allow Marré what would amount to a double recovery simply because Agritech has not yet been lowered into its grave.” The court cited Shapiro v. Smith, 652 F.Supp. 218 (S.D.Ohio 1986) (holding that wrongful disclosure action does not survive death of individual taxpayer) for the proposition that Agritech was as good as dead and therefore not entitled to damages.
Agritech had not actively engaged in business in the two years before the disclosures at issue. Although the Texas Secretary of State forfeited Agritech‘s charter twice while this suit was pending, these forfeitures were set aside prior to trial after Agritech paid its delinquent franchise taxes. Under Texas law, “the reinstatement of [a corporation‘s] charter will relate back and will revive whatever rights the corporation had at the time the suit was filed,” M & M Constr. Co., Inc. v. Great American Ins. Co., 747 S.W.2d 552, 555 (Tex.App.—Corpus Christi 1988, no writ). Thus, Agritech was technically alive at the time.
Section 7431(c) provides that the United States “shall be liable” to a taxpayer upon a finding of liability. Agritech argues that as a “taxpayer” it is entitled to recover in its own right for Parrish‘s disclosures. The Internal Revenue Code defines “taxpayer” to include “any person subject to any internal revenue tax,”
The government argues that Congress did not intend to allow a defunct corporation to
At the outset, it is clear to us that if the government had succeeded in obtaining a conviction against Agritech, the corporation would have been primarily responsible to pay any criminal penalty. Also, it is not obvious to us that Marré will make a double recovery if Agritech is allowed to recover separate damages. It is just as reasonable to infer that the creditors of this insolvent corporation would benefit from Agritech‘s recovery. We vacate the court‘s take nothing judgment as to Agritech and remand for reconsideration of Agritech‘s claim for damages and attorney‘s fees.
D.
On cross-appeal, the government argues that the district court erred in awarding attorney‘s fees to Marré in an amount greater than those required under his contingency fee agreement with his attorneys. Section 7430(a) provides that “the prevailing party may be awarded a judgment ... for reasonable litigation costs incurred” in a tax case. Section 7430(c)(1)(B)(iii) includes as reimbursable costs the reasonable fees “paid or incurred” for the services of an attorney. In this case, Marré contracted to pay his attorneys 50% of any recovery plus costs. Because the court awarded Marré $215,000, the government argues that Marré “incurred” attorney‘s fees of only $107,500. The district court, however, awarded Marré fees of $170 per hour for 1,814.38 hours, plus costs of $17,738.02, for a total award of $326,182.62.
In a case involving similar fee-shifting provisions of the Uniform Relocation Assistance and Real Property Acquisition Policies Act,
By contrast, the fee-shifting provision of the civil rights statute,
Because
IV.
For the foregoing reasons, we affirm the district court‘s statutory damages award of $215,000. We vacate the district court‘s take nothing judgment as to Agritech and remand for reconsideration of Agritech‘s claim for damages and attorney‘s fees. We also modify the district court‘s judgment to reduce its attorney‘s fees award on the Marré claim to the sum of $107,500.
AFFIRMED in part; MODIFIED in part; VACATED and REMANDED in part.