Department of the Treasury (2014)

United States

Department of the Treasury

DIRECTOR, OFFICE OF PROFESSIONAL RESPONSIBILITY,

Complainant-Appellee

Complaint No. 2014-00004

(b)(3)/26 USC 6103

Respondent-Appellant

DECISION ON APPEAL

Pursuant to General Counsel Order No. 9 (January 19, 2001) and Office of Chief

Counsel Notice CC-2014-008 (September 8, 2014), I decide disciplinary appeals to the

Secretary of the Treasury filed under 31 C.F.R. Part 10 (Practice Before the Internal

Revenue Service (IRS), hereinafter referred to as Circular 230 - all references are to

Circular 230 as in effect for the periods at issue). This is such an appeal from a

Decision and Order entered into this proceeding by Administrative Law Judge Parlen L.

McKenna. By this Appeal, Respondent-Appellant (b)(3)/26 USC 6103 (“Respondent”)

contests the granting of a Default Decision in this matter.

In my capacity as Appellate Authority, I review the entire administrative record in the

proceeding. Under Circular 230, the Appellate Authority's standard of review differs

depending upon whether the issue being reviewed is a purely factual issue or a mixed

question of fact and law (in either instance, reviewable under a "clearly erroneous”

standard), or a purely legal issue (which the Appellate Authority reviews de novo).

§ 10.78 of Circular 230. The Appeal of the granting of a Default Decision in this case is

a mixed question of fact and law.

Background

This proceeding was commenced on March 12, 20151 when Timothy E. Heinlein, an

attorney acting as the authorized representative of the Complainant-Appellee Office of

Professional Responsibility (henceforth, “OPR” or “Complainant”) filed a Complaint

against Respondent under the authority of 31 C.F.R part 102 (Circular 230), alleging that

1 As will be discussed, infra, a first Complaint was erroneously filed with the Administrative Law Judge for

the United States Department of the Interior on March 12, 2015. That Complaint was returned, unfiled, to

OPR; however, a copy of this first Complaint was mailed to the Respondent.

2 Portions of Circular 230 were amended on June 12, 2014. See 79 Fed. Reg. 33685 (June 12, 2014);

Circular 230 (Rev. 6-2014). The savings clause contained at 31 C.F.R. § 10.91 of the revised regulations

provides that any proceeding under this part based on conduct engaged in prior to June 12, 2014 which is

instituted after that date shall apply the procedural rules of the revised regulations contained in Subparts

D and E. Conduct engaged in prior to the effective dates of these revisions will be judged by the

regulations in effect at the time the conduct occurred.

the Respondent engaged in disreputable conduct under § 10.51 of Circular 230, based

upon eight separate counts and two aggravating factors alleged in the Complaint. The

Complainant requested that the Respondent be disbarred from practice before the

Internal Revenue Service (IRS).

On October 15, 2015, Administrative Law Judge Parlen L. McKenna (‘the ALJ") issued

an Order (“the Default Decision”) to the parties granting OPR’s Motion for Default

Decision in this matter. On November 25, 2015, the Respondent filed a “Notice of

Appeal (Short Version)," requesting additional time within which to file an “extended”

(b)(6)

Notice of Appeal. due to

(b)(6)

By Order dated April 6, 2016, I denied OPR's Motion to Dismiss Appeal

as Untimely, and directed OPR to file a Response brief within 30 days of that Order. On

May 6, 2016, the Complainant-Appellee Director, Office of Professional Responsibility

submitted its Opposition to Respondent's Appeal. I have reviewed the materials

submitted by the parties.

The record in this case is replete with instances of mailings by OPR and the ALJ to the

Respondent, with virtually no responses generated by the Respondent; however, in

some instances, the Respondent did respond. This record frames the question

important to the granting of the Default Decision in this case: Whether, when and how

was the Respondent served with copies of the pleadings and orders in this case?

Suffice it to say that at least two addresses were used in communications by OPR and

(b)(3)/26 USC 6103

and one address in

the ALJ to the Respondent. One address in

Same

The “

Same

address”, stated in full is:

(b)(3)/26 USC 6103/(b)(6)

The “

(b)(3)/26

USC 6103

address is:

(b)(3)/26 USC 6103

This case began on March 12, 2015, with an error; essentially, a procedural foot-fault by

OPR, by which the original Complaint filed against Respondent was filed by OPR’s

attorney with the improper Administrative Law Judge. On April 15, 2015, after being,

notified of this error, OPR’s attorney filed an identical second Complaint with the correct

ALJ, and attempted to serve the Respondent with a copy of this second Complaint.

However, these events appear to have started things off on the wrong foot, from which it

appears the proceedings never recovered.

And here’s why: On April 17, 2015, the Respondent attempted to submit a timely

Answer to that original, erroneously-filed Complaint by OPR. He served a copy of this

Answer on both the "incorrect” ALJ with whom OPR’s attorney had filed the original

Complaint, as well as with OPR’s attorney. It is not disputed that OPR’s attorney

received that Answer, some 30 pages in length, and received it prior to filing his Motion

for Entry of Default Decision. Indeed, it appears this Answer literally crossed in the mail

with OPR’s mailing of the identical “correct” second Complaint. Thus, OPR’s attorney

received Respondent’s detailed Answer within days of mailing their corrected Complaint

that now forms the basis of the Default Decision. Directly underneath Respondent's

signature to that Answer, Respondent gave his address of record as the(b)(3)/

6103

USC

26

address.

It is also uncontested by the parties that this second Complaint was identical to the

erroneously-filed Complaint for which this Answer was received. So, the Answer

submitted by Respondent and received by OPR appears to be responsive to the

allegations both in the erroneously filed original Complaint and the correctly filed second

Complaint (no opinion is being made here with respect to the merits of the allegations

contained in the Answer, as they are not at issue).

Respondent did not directly file an Answer with the correct ALJ, however, and this

ultimately led to the granting of a Default Decision. Respondent asserts that this failure

is because he did not receive any notification of the second ALJ and second Complaint

until he received a copy of the Default Decision from OPR. From an inspection of the

record, it appears that all intervening communications from Complainant and the

administrative law judges might not have been received by Respondent In these

Same

communications the Complainant and the ALJs exclusively used the

Same

address contained in Respondent’s Answer.

address, rather than the

As stated, it is clear that OPR’s attorney received a copy of Respondent’s 30 page

Answer to the Complaint (albeit the version filed by OPR’s attorney with the incorrect

ALJ) on April 22, 2015. This Answer was substantively responsive to the contents of the

allegations contained in both the original erroneously-filed original Complaint and the

identical “correctly-filed" second Complaint. Despite this, on June 3, 2015,

approximately six weeks after having received the Respondent's Answer to the (first)

Complaint, OPR’s counsel mailed a letter to Respondent alleging the improper filing of

the Answer by Respondent. OPR warned that if an Answer were not properly mailed to

the ALJ by June 19, 2015, OPR would move for entry of a Default Decision (emphasis

mine). One wonders: Why? Could not OPR, given its own initial misstep in the case,

have simply forwarded Respondent’s Answer to the correct ALJ, asking it to be

incorporated into the record as substantially compliant, and begun to use the Same

address contained in that Answer?

Indeed, it appears the Default Decision in this case is based upon the insistence that

Respondent file a second, duplicative, Answer in this case with the correct ALJ, even

though OPR’s attorney was properly served with a copy of an Answer that substantively

responded to its Complaint.

There is an email in the record, from OPR’s counsel to Curtis E. Renoe, AttorneyAdviser to the ALJ, dated July 14, 2015 (one week after the issuance of the Order to

Show Cause Regarding Filing of Answer). By this email, OPR’s counsel provided

("without comment”) a copy of Respondent's Answer to the first Complaint, which had

been delivered to OPR’s counsel approximately 12 weeks before. There is no

explanation as to why the Answer was being forwarded to the ALJ in July, having been

received by Complainant in April. No mention is made in the email from OPR’s counsel

of the (b)(3)/IRC 6103 [address contained on the Respondent's signature line of the

Answer. It seems reasonable to conclude from this email that OPR had not previously

provided a copy of this Answer to the (correct) ALJ’s office prior to July 14, 2015, and

did so only after beginning the process of seeking a Default Decision against

Respondent. The Respondent was not included on a “cc” line to this email to the ALJ’s

office; it is not known if the Respondent was included as a recipient of this message in a

hard copy.

The Default Decision in this case was entered for a Complaint to which a detailed

Answer had been provided by the Respondent to OPR’s Counsel months before, and a

copy of which OPR had belatedly provided to the ALJ, because of an insistence that

Respondent “correctly” file a second and identical 30 page Answer. Unfortunately, that

insistence was not mailed to the address provided by Respondent in his Answer. The

ALJ’s granting of the Default request by Complainant was based on a conclusion that

the record demonstrated several factual determinations, including:

a) That the revised “correct” Complaint was delivered to the Respondent on April

15, 2015;

b) That Complainant advised Respondent a second time via the Notice of

Failure to Properly File Answer that Respondent was obligated to file an

Answer not later than June 19, 2015; and

c) That OPR Counsel served Respondent with a copy of the Motion for Default

on Respondent’s last known address.

Law and Analysis

This is a serious matter: we are dealing with the disbarment from practice of a

professional's livelihood. Additionally, there is a general disfavor with default judgments;

there is instead a strong preference favoring resolution of genuine disputes on their

merits. Jackson v. Beech, 636 F.2d 831 (D.C. Cir. 1980). Other circuits have expressed

similar sentiments, using similar approaches. Harvey v. United States, 685 F.3d 939

(10th Cir. 2012); Colleton Preparatory Academy v. Hoover Universal, Inc., 616 F.3d 412

(4th Cir. 2010); United States v. Signed Personal Check No. 730, 615 F.3d 1085 (9th

Cir. 2010).

Respondent asserts that he had received only two documents in these proceedings: the

Complaint (that is, the first Complaint filed with the Department of the Interior), and a

copy of the Order of Default (sent by OPR in a transmittal letter dated October 22,

2015). Seen from the Respondent’s point of view, the record in this proceeding would

be brief and puzzling: it consisted of the receipt of the first Complaint and his mailing of

his Answer, followed by silence until the Order granting the default decision was

provided to him by a transmittal letter to the

October 22, 2015.

(b)(3)/26 USC

6103

address (after the fact) dated

On the other hand, from OPR’s point of view, the record reflects numerous documents

mailed to the Respondent with no response. At least some of these documents were

returned to OPR and the ALJ. On closer inspection, though, the circumstances

surrounding this latter view of the record are not clear, and can be confusing in some

instances.

For example, the record in this case reflects that only two items can be confirmed as

having been received by the Respondent prior to the Notice of Appeal in this case: the

erroneously filed first Complaint, and the October 22, 2015 transmittal letter conveying

the Order of Default. With respect to the first Complaint, the Respondent filed an

Answer, and mailed that to OPR and the first ALJ. With respect to the October 22, 2015

transmittal letter, the Respondent filed his Notice of Appeal. Thus, in both cases where

the record shows that Respondent actually received a document in this proceeding, the

record also shows the Respondent provided a response. Indeed, in every case where

Same

address has been used, the Respondent has timely responded. For

the

example, in this Appeal, with the requirement to serve the Respondent at the Same

address in place, the Respondent has timely fulfilled all filing requirements.

In contrast, in every other instance below where it is alleged Respondent failed to

respond to a document mailed by OPR, the available record does not demonstrate

Same

address was used. Additionally

delivery of that document, and only the

identifying this record of non-delivery was available to OPR through a simple internet

search using the certified mail number affixed to the envelopes (which is presumably

why these numbers are used). Despite having received Respondent's Answer noting

Same

address, all documents mailed by OPR or the ALJ after April 22nd failed

the

Same

address was used.

to use that address; only the

I am not convinced that the Respondent is entirely without fault with respect to the

troubling level of responsiveness to events in these proceedings; however, I have

significant doubts with respect to which items, if any, the Respondent might have

received between the time of his submission of his Answer in this case (which appears

to have crossed in the mail with the notification of the new, correct forum), and October

72 2015 when a copy of the Order of Default Decision was mailed — importantly — to

Same

address. It is entirely possible, as Respondent alleges,

Respondent at his

that he heard nothing between those two events. The record is confused and unclear,

but appears to support this view.

Indeed, there is other confusion with respect to the mailing of some items. For example,

Same

address

on June 3, 2015, OPR asserts it mailed to Respondent, solely at the

a letter that it refers to as a Notice of Improper Filing (which the ALJ referenced in his

Default Decision as the Notice of Failure to Properly File Answer). On the Certificate of

Service for this letter, Complainant's secret ary certifies that the letter was mailed to

Respondent, bearing certified mail number

3547. However, the

mailing record is confused here. Attached to the exhibit copy in the record of this June

3rd correspondence is a copy of the official USPS Track and Confirm website

information, for certified mail number REDACTED TEXT 3530 (emphasis mine and

henceforth “3530”), as having been mailed on June 3, 2015 (received by the USPS on

June 4, 2015). However, this is not the certified mail number reflected on the Certificate

of Service for the June 3, 2015 “Notice of Improper Filing" letter.

This “3530” certified mail number reflected in the June 2015 Track and Confirm

information relates to the certified mail number referenced in OPR’s Certificate of

Service attached to the second Complaint to the Respondent, which is alleged to have

been mailed on April 15, 2015 (some six weeks earlier). Thus, it is unclear what was

mailed on June 3, 2015, and what was mailed on April 15, 2015, and why the

Certificates of Service are incorrect. Was the second Complaint only mailed on June 3rd

(and not April 15th) as this document would appear to show? Such confusion makes it

difficult, if not impossible, to determine the delivery of items in the record. The accuracy

of the Certificates of Service themselves are now called into question, and would likely

be impossible to unravel using USPS Track and Confirm to determine actual mailing

dates of the various correspondence. In short, the Certificates of Service for key

documents, upon which the Default Decision are based, are unreliable.

OPR asserts that it used the “last known address” for the Respondent, and that service

(b)(3)/26 USC

address is sufficient. This is not a last known address case. While it is

on the

6103

certainly relevant that the last known address may be relied upon to mail the complaint

to the Respondent, it is uncontested that Respondent received that Complaint.

However, having been so served, the Respondent then provided Complainant with a

different address of record in his Answer, received within davs of the correctly filed

Same

address) in

Complaint. The Complainant failed to use this address (the

subsequent mailings relating to this litigation.

This is litigation, and OPR had in its possession an Answer filed by Respondent that, in

Same

address as the Respondent’s address of

the signature line, contained the

record for this case. Having been received in such manner by Complainant, that

Same

address should have been used with regard to subsequent

correspondence relating to this case.

Specifically, I find to be clearly erroneous the ALJ’s factual determinations:

a) That the revised “correct” Complaint was delivered to the Respondent on April

15, 2015;

b) That Complainant advised Respondent a second time via the Notice of

Failure to Properly File Answer that Respondent was obligated to file an Answer not

later than June 19, 2015; and

c) That OPR Counsel served Respondent with a copy of the Motion for Default

on Respondent’s last known address.

Documents within the record, from the official website of the United States Postal

Service, state that the second “correct” Complaint, using the tracking number identified

by the Complainant in its Certificate of Service, was mailed on June 3, 2015, and not

April 15, 2015. Further, this calls into question the mailing date for other items served on

Respondent, including the Notice of Improper Filing/Notice of Failure to Properly

Answer, dated June 3, 2015. Lastly, I find that the Motion for Default was not properly

served by Complainant on the Respondent’s address of record, which address was

conspicuously contained on the Answer served on Complainant on April 20, 2015.

Again, overarching all of this discussion, it is clear that OPR had a copy of

Respondent’s Answer, even as it insisted on procedural exactitude by Respondent to

“correctly” file a second, identical Answer, demanding this exactitude by continually

using an address which generated no response, while ignoring the conspicuous

address of record used by the Respondent in that detailed Answer. Under these

circumstances, and given the confusion of the mailing record, I find that it was clearly

erroneous to enter a Default Decision against the Respondent.

Therefore:

For the reasons stated, the ALJ’s Default Decision is REVERSED and I REMAND this

matter to the ALJ directing that a copy of the Answer in the possession of OPR’s

Counsel is to be filed as the Answer of Respondent, and a hearing on the merits to be

undertaken pursuant to the procedures identified in Circular 230.

It is further ORDERED that all future correspondence directed to Respondent in this

matter is to be served upon Respondent at the two addresses indicated on the

Certificate of Service to this Order, or to such other address that the Respondent

provides to OPR and the Administrative Law Judge.

Thomas J Travers

Appellate-Authority

Office of Chief Counsel

Internal Revenue Service

(As Authorized Delegate of the

Secretary of the Treasury)

June 6, 2017

Lanham, MD

CERTIFICATE OF SERVICE

I hereby certify that the DECISION ON APPEAL dated June 6, 2017 in Complaint No.

2014-00004 was sent this day by UPS Next Day Air and by First Class U.S. Mail to the

addresses listed below:

UPS Next Day Air:

(b)(3)/26 USC 6103

First Class U.S. Mail:

Honorable Parlen L. McKenna

United States Coast Guard

Coast Guard Island

Building 54A

Alameda, CA 94501

Stephen A. Whitlock

Director, Office of Professional Responsibility

Internal Revenue Service

1111 Constitution Avenue, NW

SE:OPR 7238IR

Washington, DC 20224

Timothy E. Heinlein, Senior Counsel

Office of Chief Counsel (IRS)

100 First Street, Suite 1800

San Francisco, CA 94105

(b)(3)/26 USC 6103/(b)(6)

(b)(3)/26 USC 6103

Thomas J Travers

Appellate Authority

Office of Chief Counsel

Internal Revenue Service

Lanham, MD