OPINION
Pending in this AMCOR tax case is Plaintiffs’ motion for reconsideration, filed August 5, 2011, regarding certain limitations and penalty interest claims. In their motion, Plaintiffs first question whether these claims were reinstated when final judgment against them was vacated on July 1, 2008. If their claims were not reinstated, they question whether the decision in the test case on these claims, Prati v. United States,
For the reasons stated below, Plaintiffs motion for reconsideration is denied.
I. Background
Plaintiffs seek a tax refund relating to their investment in certain limited partnerships that were part of a group of similarly structured partnerships managed by American Agri-Corp., Inc. (“AMCOR”) in the 1980s. The partnerships were designed “to generate a large loss in the first year, allowing each partner to claim a tax deduction averaging twice the size of his investment, with the excess loss to be recaptured in subsequent years.” Prati v. United States,
More than 100 AMCOR tax refund cases were eventually filed in this court. The AM-COR plaintiffs, represented by the same counsel, and the Government jointly filed notice with the court that the cases here were indirectly related. The parties selected three representative cases by which to resolve common issues of law and fact. These representative cases were Isler, Case No. 1-344; Prati, Case No. 2-60; and Scuteri, Case No. 1-358.
The Martins’ complaint asserted four categories of claims: 1) that the IRS’s assessment of taxes due was made after a limitations period, based on 26 U.S.C. § 6501, had expired (the “limitations” or “untimely assessment” claim); 2) that the IRS had improperly imposed a penalty interest rate under former 26 U.S.C. § 6621(e) (the “penalty interest” or “tax-motivated (‘TMI’) refund” claim); 3) that interest should have been abated under 26 U.S.C. § 6404(e) (the “abatement” claim); and 4) that the IRS may have backdated assessments. In their instant motion for reconsideration, the Plaintiffs note that the United States Supreme Court has held that the Court of Federal Claims has no jurisdiction over § 6404(e) claims, Hinck v. United States,
Thus, the only claims remaining — and the subject of the motion for reconsideration— are their limitations and penalty interest claims.
II. Procedural Posture of This Case
Most of the AMCOR eases in the Court of Federal Claims eventually were transferred to, or originally assigned to, Judge Lawrence Block. Pursuant to a chart jointly proffered by the parties, the Prati case was deemed by the court as representative of the limitations and penalty interest claims, shared by 76 of the other AMCOR cases. This group of 77 cases were not, however, formally consolidated on the court’s docket.
On April 16, 2008, Judge Block issued his opinion in Prati,
Whether categorized as a ‘partnership item’ or as an ‘affected item,’ the Court is without jurisdiction to adjudicate the statute of limitations issue plaintiffs raise in this partner-level proceeding. This is because any resulting refund here would be ‘attributable to’ partnership items within the meaning of § 7244(h) ...
Id. at 433.
With respect to the penalty interest issue, the court noted the application of former § 6621(c), which imposed a 120 percent interest rate as a penalty for a taxpayer’s substantial underpayment attributable to “tax-motivated transactions.” Id. at 437. The definition of “tax motivated transaction” included “any sham or fraudulent transaction.” Id. at 438. Because the determination of a sham or fraudulent transaction “must be done on the partnership level,” id., and because the plaintiffs failed to challenge the sham transaction allegations in the partnership proceeding before the Tax Court, “they cannot now be heard on this issue. This Court simply has no jurisdiction.” Id. at 439.
Judge Block noted that the 76 other eases presented factual allegations “virtually identical to the named representative ease.” Id. at 423 n. 2 (listing the 76 eases). Accordingly, in granting the Government’s motion to
Judgment was entered on the docket of Prat% as well as separately in all of the other 76 cases on April 18, 2008. See, e.g., Martin, No. 03-2272, Docket No. 13 (“JUDGMENT entered, pursuant to Rule 58, that all claims by the plaintiffs are dismissed for lack of jurisdiction.”).
On May 2, 2008, however, the Martins filed a motion to vacate the judgment entered against them as a result of the Prati I decision. They acknowledged the dismissal of all 77 cases covered by the Prati decision, but argued that final judgment against them was inappropriate because they had also pled an individual issue — the then-extant backdated assessment claim — that was not common to the Prati I group of 77 cases (or addressed therein). “Therefore, by resolving the § 6229(a) [limitations] and § 6621(c) [penalty interest] issues the Prati opinion resolved all issues in most, but not all, of the 77 cases. In a small number of those eases the partner also pled issues arising from his individual circumstances.” Pis.’ Mot. to Vacate J. at 2.
The Martins’ motion to vacate judgment also noted that a motion for reconsideration had been filed in Prati on April 30, 2008. In that motion, the Pratis requested that their motion for reconsideration be deemed as filed in each of the 77 cases encompassed by Judge Block’s decision. On June 6, 2008, the court acceded to that request: “Accordingly, it is ORDERED that the MOTION FOR RECONSIDERATION filed in the instant matter IS DEEMED TO HAVE BEEN FILED IN THE OTHER 76 CASES listed in footnote one, page one, of said motion.” Prati Case No. 2-60, Docket No. 93 (emphasis in original). Judge Block’s order was entered in Prati although no corresponding entry of the motion for reconsideration was made, however, on the docket of the other 76 eases.
On June 18, 2008, while a decision on reconsideration was still pending in Prati the Martins then moved, via a “Motion to Perfect the Record,” that the Prati motion for reconsideration and the Prati order deeming the reconsideration motion to have been filed in the other 76 cases be included in the record of their case “to reflect that a timely motion for reconsideration was deemed filed in this ease.” Pis.’ Mot. to Perfect Record.
On July 1, 2008, Judge Block issued his decision on the Pratis’ motion for reconsideration. Prati v. United States,
While he denied reconsideration “in each of the 77 eases covered by the Prati decision,” he also ruled that “the judgments in the 15 cases listed in footnote 4 of this Order are VACATED for the limited purpose of allowing plaintiffs to pursue any unresolved, case-specific claims that may still be outstanding.” Id. at 379. The Martins were among those 15 eases. Judge Block was emphatic, however, that, beyond the case-specific claims, “[t]he Court is not reconsidering its opinion in Prati — the opinion remains the law in each case.” Id.
Accordingly, Docket No. 13 in the Martins’ case, in which judgment had been entered on April 18, 2008, dismissing their claims for lack of jurisdiction, was amended by the notation: “[VACATED BY 07/01/08 ORDER].” A corresponding but unnumbered docket en
In a Joint Status Report in Isler, the parties delineated the ease-specific issues that remained in the handful of cases as to which judgment had been vacated in Prati II. “The following list enumerates the 15 eases in alphabetical order, and comprehensively identifies all issues plaintiffs allege survived the Court’s Prati decision and the paragraphs of the complaint wherein plaintiffs claim the alleged issues are pleaded.” Isler, Case No. 01-344, Docket No. 137 (October 24, 2008). The Martins’ only remaining issues were the backdated assessment claims. The Isler parties also requested that those cases, including the Martins’, be stayed pending the outcome of appeals to the Federal Circuit in Prati and in Keener, another indirectly-related AMCOR case.
On January 8, 2009, the Federal Circuit affirmed the decision of the trial court in Keener dismissing plaintiffs’ claims for lack of jurisdiction. Keener v. United States,
In the Isler order, Judge Block explained, [W]ith respect to the fourteen eases at issue here, the court need not address the merits of plaintiffs’ arguments for consolidation or transfer because the arguments’ fundamental premise is false. Simply put, the claims that plaintiffs assert to be common to these fourteen cases are claims that the court has already dismissed for lack of jurisdiction. In particular, plaintiffs’ refund claims under § 6501 and § 6621 — the two types of claim that plaintiffs now identify as purportedly common to the fourteen cases, see 2011 JSR at 2— are precisely the claims that the court dismissed in Prati I.
The court’s subsequent order to vacate judgment in the fourteen cases did not, as plaintiffs seem to assume, vacate the dismissal of these common claims____
Accordingly, whatever merit plaintiffs’ arguments may have regarding a conflict between the Federal Circuit’s panel decision in Prati and Jade Trading, these are arguments to be made to the Federal Circuit on appeal, once the taxpayer-specific claims are resolved and final judgment is reentered in these fourteen eases. In further proceedings before this court, however, plaintiffs may not relitigate claims that were fully litigated more than three years ago and were dismissed by the court for lack of jurisdiction. That dismissal, it bears repeating, stood undisturbed upon reconsideration____
[Ojnly taxpayer-specific claims remain unresolved ...
Isler, Docket No. 161 (March 29, 2011) (internal citations omitted).
Because only ease-specific issues remained, on March 31, 2011, the instant case and the other eases like it were re-assigned among other judges of this court for resolution of their individual issues. Since then, as noted above, the Martins have withdrawn their individualized, backdated assessment claims.
III. Discussion
A. Dismissal of the Martins’ Common Claims Not Vacated
It is clear to this court not only that Judge Block reinstated the Martins’ case solely to the extent of their case-specific claims, but also that the Martins themselves acquiesced in this understanding and outcome. In their effort to salvage all of their original claims, they make finely-drawn, hair
Neither in their motion to vacate judgment nor in their adoption of the Prati motion to reconsider did the Martins raise any arguments about the limitations or penalty interest claims distinct from those raised by the Pratis. Indeed, in their motion to vacate judgment, the Martins acknowledged that “by resolving the § 6229(a) and § 6621(c) issues the Prati opinion resolved all issues in most, but not all, of the 77 cases,” excepting only their case-specific, backdated assessment claims (which have now been withdrawn).
The Martins quibble further about the impact of Judge Block’s March 29, 2011, denial of their motion to transfer, with its reference to and attachment of the Isler Order of the same date. They argue that the Isler order was merely referenced but not actually filed in the Martins’ case. It was therefore not the law of their ease, they aver, and its reasoning not binding.
Having proffered the Prati ease as representative of their claims regarding limitations and penalty interest, having moved to vacate final judgment against them only on the grounds that they had also raised a separate, unresolved issue, having joined in the motion to reconsider the Prati I decision, and having waited on the sidelines while plaintiffs with non-case specific claims in the other cases covered by Prati I unsuccessfully pursued appeals to the Federal Circuit and sought certiorari to the Supreme Court, the Martins now propose that this court give them a fresh start.
This court finds to the contrary and holds that, pursuant to Prati I, the Martins’ claims regarding limitations and penalty interest were dismissed for lack of jurisdiction and that, pursuant to Prati II, those claims were denied reconsideration and not reinstated when judgment against them was vacated for the limited purpose of pursuing their case-specific claims.
B. Reconsideration of Prati I Not Warranted
Alternatively, the Martins ask this court, pursuant to Rules 54(b) and 59(a)(1) of the Rules of the Court of Federal Claims (“RCFC”), to reconsider the Prati I decision as it applies to them.
These rules articulate the understanding that courts possess inherent authority to modify interlocutory orders prior to the entering of final judgment in a case. See Wolfchild v. United States,
The standard for reconsideration of an interlocutory order under RCFC 54(b) and 59(a)(1) have been described as less “rigorous” than those, for example, applicable to final judgments under RCFC 59(e). Id. at
Despite the flexible standards governing reconsideration herein and the discretion afforded the trial court, see Alpha I, L.P. ex rel. Sands v. United States,
Despite the somewhat confused procedural posture of the Martins’ ease vis-a-vis the representative cases of Prati and Isler, it is difficult to conclude that denial of reconsideration would work a manifest injustice.
They argue that they should be given the opportunity, heretofore denied them, to present their arguments and their facts. “[T]he Martins’ facts and arguments relevant here have never been addressed in any of [the other AMCOR-related cases] because they have never been consolidated with any other suit before this Court.” Pis.’ Reply to Resp. to Pis.’ Mot. Recons, at 10 (emphasis in original). They also challenge Judge Block’s assertion in Prati I that the 76 other eases covered by the judgment of dismissal in that opinion “present factual allegations virtually identical to the named representative case.” Prati I,
Accompanying their motion for reconsideration is an affidavit from Frederick H. Behrens, the Tax Matters Partner (“TMP”) of most of the AMCOR partnerships. His affidavit is presented in support of their argument that their claim presents factual and legal grounds distinct from the other AM-COR cases. In particular, with respect to their penalty interest claim, they seek the opportunity to argue that “in TEFRA-related refund suits where the assessment was based on a partnership-level Tax Court decision, res judicata is a threshold issue that must be resolved before the refund court addresses whether § 7422(h) bars exercise of its existing 28 U.S.C. §§ 1346(a) and 1491(a) refund jurisdiction.” Id. at 27 (emphasis in original).
As regards their limitations claim, they assert that Prati III is in conflict with the Federal Circuit’s prior decision in Jade Trading, LLC v. United States,
Plaintiffs’ arguments in the instant motion for reconsideration must be viewed, however, in the context of the representation in their 2008 motion to vacate the judgment in Prati I that “by resolving the § 6229(a) and § 6621(c) issues the Prati opinion resolved all issues in most, but not all, of the 77 cases.” Pis.’ Mot. to Vacate at 2. The only exception that the Martins raised then was that their complaint still presented the unresolved backdated assessment claims. It bears noting that, although they had the opportunity at that time, the Martins did not make any argument that their facts were materially different from those presented by the Pratis. Thus, had it not been for their ease-specific claims, which have now been withdrawn, the Martins would have been in the same posture as the other eases encompassed by Judge Block’s dismissal for lack of jurisdiction in Prati I. The Pratis and 54 other AMCOR partners in that group of 77 appealed to the Federal Circuit, which accepted Prati and Deegan as representative cases. Judge Block’s dismissal was affirmed on appeal in Prati III. The taxpayers in the rest of that group on appeal then sought to distinguish their circumstances, but their dismissals were all summarily affirmed. See Keefe v. United States,
The Behrens affidavit, then, is not so much an argument for reconsideration based on “the discovery of new or different material evidence,” so much as the setting for a new or more thoroughly informed argument claiming an intervening change in controlling legal authority. They cite Duffie v.United States,
Duffle, however, is a non-binding decision of the Fifth Circuit which was issued even prior to the Federal Circuit’s decision in Prati HI. According to Plaintiffs, Duffle prescribes a particular res judicata analysis that must precede any finding that jurisdiction is barred by § 7422(h). The Federal Circuit, however, was clear: “Because the appellants’ challenge to the penalty interest assessments is inherently a dispute over the proper characterization of the partnerships’ transactions, that issue is barred by section 7422(h) from being litigated in the refund action before the Court of Federal Claims.” Prati III,
Jade Trading and Stobie Creek are also unavailing. Jade Trading, like Duffle, was decided prior to the Federal Circuit’s decision in Prati III. In Jade Trading, the Federal Circuit affirmed the trial court’s finding that a partnership’s “spread transaction” lacked economic substance but held that the trial court “lacked jurisdiction to review the application of penalties based on the outside bases of Jade’s pai’tners.” Jade Trading,
As noted by Defendant, however, the Prati plaintiffs raised the argument that Prati III conflicted with Jade Trading in their unsuccessful attempt to obtain a rehearing en banc and in seeking certiorari to the Supreme Court. This court is not persuaded that either Jade Trading or Stobie Creek suffices for purposes of reconsideration as demonstrating a change in controlling legal authority-
The applicability of the Supreme Court decisions in Henderson and Tohono O’Od-ham in support of reconsideration here is even more tenuous. Henderson addressed the question “whether a procedural rule is ‘jurisdictional,’ ” in particular a 120-day
In a similar vein, it is not evident that the decision in Tohono O’Odham regarding the unique context of 28 U.S.C. § 1500 has application to the TEFRA facts and claims of this AMCOR case.
IV. Conclusion
In the Isler Order of March 29, 2011, attached to his order in this case denying transfer, Judge Block wrote, “whatever merit plaintiffs’ arguments may have regarding a conflict between the Federal Circuit’s panel decisions in Prati and Jade Trading, these are arguments to be made to the Federal Circuit on appeal, once the taxpayer-specific claims are resolved and final judgment is reentered in these fourteen eases.” Isler, Docket No. 161 at 3 (March 29, 2011).
This court does not find that reconsideration is warranted, for the reasons reviewed above. Further, because the Martins have withdrawn their backdated assessment claims, see Docket No. 28, and because judgment has previously been entered in this case denying their limitations and penalty interest claims, the Clerk of Court is directed to enter final judgment accordingly and to dismiss this action.