Justia Civil Procedure Opinion Summaries

Defendant LuLaRoe, a multilevel-marketing company that sells clothing to purchasers across the United States through “fashion retailers” located in all fifty states, allegedly charged sales tax to these purchasers based on the location of the retailer rather than the location of the purchaser. LuLaRoe eventually refunded all the improper sales tax it collected, but it did not pay interest on the refunded amounts. Plaintiff, an Alaska resident who paid the improperly charged sales tax to LuLaRoe, brought this class action under Alaska law on behalf of herself and other Alaskans who were improperly charged, for recovery of the interest on the now-refunded amounts collected and for recovery of statutory damages. The district court certified the class under Rule 23(b)(3) and LuLaRoe appealed under Rule 23(f).   The Ninth Circuit vacated the district court’s order certifying the class of Alaska purchasers and remanded for further proceedings. The panel first rejected LuLaRoe’s argument that class certification was improper because the small amount of money currently owed to some class members was insufficient to support standing and the presence of these class members in the class made individualized issues predominant over class issues. The panel next rejected LuLaRoe’s assertion that some purchasers knew that the sales tax charge was improper but nevertheless voluntarily paid the invoice which contained the improperly assessed sales tax amount, and thus, under applicable Alaska law, no deceptive practice caused any injury for these purchasers. Finally, the panel held that LuLaRoe’s third argument, that class certification should be reversed because some fashion retailers offset the improper sales tax through individual discounts, had merit. View "KATIE VAN V. LLR, INC., ET AL" on Justia Law

Plaintiff, a franchisor of tax preparation services, appeals from the district court’s denying its motion for preliminary injunctive relief to enforce, among other things, covenants not to compete or solicit former clients against Defendants, its former franchisees. On appeal, Plaintiff argues that the district court erroneously applied a heightened standard for obtaining preliminary injunctive relief, failed to credit an undisputed fact that Plaintiff had grounds to terminate the franchise agreements because Defendants were violating federal tax laws, and was compelled as a matter of law to find that it would suffer irreparable harm to its goodwill and client relationships in the absence of an injunction.   The Second Circuit affirmed the order denying preliminary relief. The court concluded that the district court applied the appropriate standard, permissibly credited Defendants’ denials that they violated federal tax laws, and acted well within its discretion in concluding that Plaintiff would not suffer irreparable harm. The court reasoned that nothing in the court’s precedents compels a district court to find irreparable harm to goodwill and client relationships in covenant-not-to-compete or -solicit cases simply because irreparable harm is often found in such cases. Instead, a plaintiff must present the district court with actual evidence. On that record, the court wrote it cannot conclude that the district court’s finding that Plaintiff had failed to make a strong showing of irreparable injury represented a clear error or exceeded the court’s discretion. View "JTH Tax d/b/a Liberty Tax Service v. Agnant" on Justia Law

Petitioner made an offer in compromise (OIC) to settle his outstanding tax liability. Under the Tax Increase Prevention and Reconciliation Act (TIPRA), Petitioner submitted a payment of twenty percent of the value of his OIC, acknowledging that this TIPRA payment would not be refunded if the OIC was not accepted. The Commissioner of Internal Revenue did not accept the OIC because the Commissioner concluded that ongoing audits of Petitioner's businesses made the overall amount of his tax liability uncertain. Petitioner then sought a refund of his TIPRA payment.   In a previous appeal, the Ninth Circuit held that the Internal Revenue Service did not abuse its discretion by returning the OIC, but vacated the Tax Court’s determination that the IRS had not abused its discretion in refusing to return the TIPRA payment. The Ninth Circuit remanded for the Tax Court to consider its refund jurisdiction in the first instance. On remand, the Tax Court held that it did not have jurisdiction.   The Ninth Circuit affirmed the Tax Court’s decision because there is no specific statutory grant conferring jurisdiction to refund TIPRA payments. The panel explained that, as the Tax Court correctly noted, it is a court of limited jurisdiction, specifically granted by statute, with no authority to expand upon that statutory grant. View "MICHAEL BROWN V. CIR" on Justia Law

Mississippi Hub, LLC ("MS HUB") operated an underground natural gas storage facility mostly located in Simpson County. In 2007, MS HUB and Simpson County entered into a fee-in-lieu agreement regarding ad valorem taxes on the first phase of the facility. It was agreed that, in exchange for locating the facility in Simpson County, for ten years MS HUB would pay a third of what its taxes would have otherwise been. It was also agreed that the facility was industrial personal property for taxation purposes, that the value of the property would be determined in accordance with Mississippi Code Section 27-35-50 (Supp. 2021), and that economic obsolescence would be considered by the tax assessor at the request of the company. In 2017, MS HUB contacted the Simpson County Tax Assessor regarding market changes in the natural gas storage industry and how those changes affected the value of the MS HUB facility. The assessor ultimately concluded that a reduction of 20 percent for economic obsolescence should be applied for the 2019 tax year. The Simpson County Board of Supervisors, however, assessed the property at $56,527,560—which would correspond to a true value of $376,850,400, the assessed true value without the adjustment for economic obsolescence. MS HUB objected to the assessment at the board’s August 5, 2019 equalization meeting. The board dismissed the objections made by MS HUB without giving a written explanation. MS HUB thereafter filed a “Petition for Declaratory Judgment and, in the alternative, Petition for Appeal from Determination of Ad Valorem Tax Assessment.” Simpson County and its tax assessor, Charles Baldwin, were named as defendants. Simpson County argued that the appeal by MS HUB was untimely and its expert based his opinion on the wrong approach to valuation. The circuit court granted summary judgment, but the Mississippi Supreme Court reversed, finding there were no grounds upon which summary judgment should have been granted. Judgment was reversed and the matter remanded for further proceedings. View "Mississippi Hub, LLC v. Baldwin" on Justia Law

The Oregon Department of Revenue assessed taxpayers $5,595 for deficient taxes, plus additional penalties and interest, for tax year 2013. Taxpayers first appealed that determination to the Magistrate Division of the Tax Court. While the case was pending there, the parties jointly moved to hold the proceedings in abeyance pending the outcome of an Internal Revenue Service audit reconsideration. The parties also entered into an agreement extending the limitation period for the department to make “any adjustment necessary to arrive at the correct amount of Oregon taxable income and Oregon tax liability.” The limitation period expired April 30, 2019, and no new or modified assessment was sent. After the Magistrate Division proceedings were reinstated, taxpayers contended that the extension agreement voided the original assessment, and so the absence of a new assessment meant the court should grant summary judgment in their favor. The department countered that the original assessment remained valid and in effect. The magistrate agreed with the department and denied taxpayers’ motion, and later denied taxpayers’ two motions for reconsideration. After taxpayers repeatedly refused to comply with the department’s request for production of documents, the department moved to dismiss. The magistrate granted that motion, and taxpayers appealed that decision by filing a complaint with the Tax Court Regular Division. Taxpayers’ complaint sought relief from the 2013 assessment of deficient income taxes, and included a motion by taxpayers to stay the statutory requirement to pay the deficiency, together with an affidavit regarding their finances to support their claim that payment would impose an undue hardship. The Tax Court ultimately dismissed taxpayers' appeal for failing to either pay the assessed income tax or show that doing so would constitute an undue hardship. Finding no error in that judgment, the Oregon Supreme Court affirmed dismissal. View "Picker v. Dept. of Rev." on Justia Law

Taxpayers, who did not dispute that they had in fact been paid substantial wages in tax years 2016-18, contended at Tax Court that they owed no Oregon income tax for those years. The Tax Court concluded their arguments in support of that contention were frivolous and therefore warranted a penalty under ORS 305.437. Accordingly, the court ordered taxpayers to pay the Department of Revenue (department) a penalty of$4,000. Taxpayers appealed, challenging only the penalty award. Finding no reversible error, the Oregon Supreme Court affirmed the Tax Court’s judgment. View "Jimenez v. Dept. of Rev." on Justia Law

Condominium owners alleged that a sewer service charge collected by Napa Sanitation District consists of a “capacity fee” and a “use fee” and that the latter was an unlawful tax. A challenge to the capacity fee was barred by a 120-day limitations period, Government Code 66022 Although the complaint expressly did not attack the capacity fee, the District argued that the ordinances authorizing the sewer service charge are inseverable, so the court would have to invalidate the entire charge if the plaintiffs prevailed. The trial court dismissed the suit.The court of appeal reversed. It was premature for the trial court to decide the issue of severability. The severability doctrine is intended to determine the scope of the remedy after a legal infirmity in the ordinance has been established; a finding of in-severability would not alter the nature of the claim or the underlying rights. Even if severability principles would require the invalidation of the entire sewer service charge, the District, rather than the plaintiffs, would bear the consequence of its decision to draft the ordinances that way. Severability is a shield by which a legislative body can preserve parts of its law that are not implicated by a valid legal claim, not a sword to preclude that claim, View "Raja Development Co., Inc. v. Napa Sanitary District" on Justia Law

From 1986-1991, Weiss did not pay federal income taxes. In 1994, Weiss late-filed returns for those years, self-reporting a $299,202 liability. The IRS made tax assessments against him, triggering a 10-year limitations period for collecting unpaid taxes through a court proceeding or a levy. Weiss’s subsequent bankruptcies tolled that limitations period three times: In July 2009, the IRS began the process of a levy. It mailed a Final Notice to Weiss in February 2009, informing Weiss that it intended to levy his unpaid taxes and that he could request a Collection Due Process hearing. The notice was not sufficient to make a levy, so the limitations period continued to run. Weiss timely requested a Collection Due Process hearing, which suspended the statute of limitations for the period during which the hearing “and appeals therein” were “pending,” 26 U.S.C. 6330(e)(1); no less than 129 days remained in the limitations period. Weiss did not prevail at the hearing or in any of his review-as-of-right federal court challenges. As a last resort, Weiss filed a petition for certiorari with the Supreme Court in October 2018. On December 3, 2018, the Court denied that petition. Instead of proceeding to levy Weiss’s property, the government initiated an action in the district court on February 5, 2019.The Third Circuit found the action timely. Petitions for writs of certiorari are “appeals therein.” An appeal remains “pending” until the time to file such a petition expires. View "United States v. Weiss" on Justia Law

The Eighth Circuit reviewed a case for the second time regarding “whether a South Dakota tax on nonmember activity on the Flandreau Indian Reservation (the Reservation) in Moody County, South Dakota is preempted by federal law. On remand, and after a six-day video bench trial, the district court entered judgment in favor of the Tribe, concluding again that federal law preempts the imposition of the tax.   The Eighth Circuit reversed and remanded. The court explained that in light of guideposts from the Supreme Court, even with the evidence that the district court heard at trial, the court cannot conclude that the federal regulation in IGRA regarding casino construction is extensive. The court reasoned that even with a more factually developed record than the court considered on summary judgment, the Bracker balancing test does not weigh in favor of preemption under IGRA because the extent of federal regulation over casino construction on tribal land is minimal, the impact of the excise tax on the tribal interests is minimal, and the State has a strong interest in raising revenue to provide essential government services to its citizens, including tribal members. The district court thus erroneously entered judgment in favor of the Tribe based on IGRA’s preemption of the excise tax. View "Flandreau Santee Sioux Tribe v. Michael Houdyshell" on Justia Law

In 2002, Douglas Coe, Jacqueline Coe, and GFLIRB, LLC (collectively the “Coes”) were involved in the sale of a company in which they held a substantial interest. Their accountants, BDO Seidman, LLP (“BDO”), advised them of a proposed tax strategy in which the Coes could invest in distressed debt from a foreign company in order to offset their tax obligations. In connection with the proposed tax strategy, BDO advised the Coes to obtain a legal opinion from an independent law firm, Proskauer Rose LLP (“Proskauer”). The Coes followed BDO’s advice, obtained a legal opinion from Proskauer, and claimed losses on their tax returns as a result. But in 2005, the Internal Revenue Service (“IRS”) initiated an audit, which ultimately led to a settlement in 2012. After settling with the IRS, the Coes filed suit against Proskauer in December 2015, asserting legal malpractice, breach of fiduciary duty, fraud, negligent misrepresentation, and other claims. After limited discovery on whether the statute of limitation barred the Coes’ claims, the trial court concluded that it did and granted summary judgment in favor of Proskauer, and the Court of Appeals affirmed. The Georgia Supreme Court concluded the Court of Appeals erred in determining that the Coes failed, as a matter of law, to exercise reasonable diligence to discover Proskauer’s allegedly fraudulent acts. Judgment was reversed and the matter remanded to the trial court for further proceedings. View "Coe, et al. v. Proskauer Rose, LLP" on Justia Law