T .C . Memo . 2009-27 3

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UNITED STATES TAX COUR T

RICHARD AND FIORELLA HONGSERMEIER, Petitioners v .

COMMISSIONER OF INTERNAL REVENUE, Responden t

Docket No .

Filed November 25, 2009 .

29643-86 .

Michael Louis Minns and Enid M . Williams,

for

petitioners .

Henry E . O'Neill ,, for respondent .

Background

CONTENTS

. . . .

I . Kersting Tax Litigation Through Dixon V Remand

II . Dixon V Remand Proceeding

A . Houston , Status Conference

. 8

. 14

. 15

B . Los Angeles Status Conference and Thompso n

Tax Records for Years Other Than 1979, 1980 ,

and 1981

. ' .

. 17

SERVED NOV 2 5 2009

C . , Las Vegas Specal` Session

D ._ Los Angeles . Special Session

E . iWashington, D .C, Special Session

Petitioners' Opening Brie f

Our Determination of Scope of Thompso n

Settlement and Awards of Appellate Fee s

Minns' Motion for. Reconsideratio n

III . The Minns Law Office's Dixon V .Reman d Proceeding'Fe e

and,Expense Requests

A . General Rule s

Meaning of "Lncurred" Under Sectio n

6673 ( a) (2) .(B )

3032

IL . Reasonable . Hourly Rates

A . Minns' and Williams' Hourly Rates .

.Bankruptcy

Against .McWade and

- 3

6 ., Motion for Reconsideration .

8 . Entries Related to Joseph Nunan .

5 . Client Relations

7 . Entries Related to L . T . Bradt

9 . Chapin Billing Dispute

b . Overtime Air Conditioning

11 . Overhead Expenses

a . Secretary's Services

10 . Closed Cases

12 . Inadequately Described Entries

13 . Miscellaneous

a . Minns' Services

b . Williams' Services

c . Paralegal Services

d . Total

14 . Total Reductions for Entries Not Reasonabl y

. .

Related to Dixon,V Remand Proceeding

C . Reliability of Documentation .

D .'

Duplicative and Excessive Efforts

1 . Excessive Fees and Expenses

2 . Reduction for Duplicative and Excessiv e

. . . . . . . . . . . . . . . .

Efforts

Conclusion

MEMORANDUM OPINIO N

BEGHE,

Judge : This is ;thelthird opinion in our third set o f

opinions on various petitioners' applications for attorney's fees

and expenses incurred in the Kersting tax shelter projec t

litigation after the discovery and disclosure of the misconduc t

of respondent's trial counsel in Dixon v . Commissioner , T .C .

Memo. 1991-614 (Dixon II), vacated and remanded, per curiam sub

nom .

DuFresne v . Commissioner , 26 F .3d 105 (9th Cir . 1994), o n

remand Dixon v . Commissioner , T .C . Memo . 1999-101 (Dixon III )

revd . and remanded 316 F .3d 1041 (9th Cir . 2003)-(Dixon V), o n

remand Dixon v . Commissioner , T .C . Memo . 2006-90 (Dixon VI) ,

supplemented by Dixon v . Commissioner , T .C . Memo . 2006-190 (Dixo n

VIII), on appeal (9th Cir ., Dec . .28, 2006, and Jan . 3, 3 2007) .

In our first attorney 's fees .opinion,

Dixon v . Commissioner ,

T .C . Memo . 2000-116 (Dixon IV) (supplementing Dixon III), w e

awarded Kersting project petitioners, attorney' s fees and expense s

under section 6673 (a) (2)(B)1 for services in this Court rendered

by Attorneys Joe Alfred Izen, Jr . (Izen) :, Robert ; Allen Jones

(Jones), and Robert Patrick,Sticht (Sticht) during the reman d

from DuFresne .

'Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years at issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure .

- 5 In the second set of attorney's fees opinions,

Dixon-v .

Commissioner , T .C . Memo . 2006-97 (Dixon VII), and Young v .

Commissioner , T .C . Memo . 2006-189, we responded to the

supplemental mandate of the Court of Appeals for-the Ninth

Circuit to rule on Kersting project petitioners' requests for

appellate attorney's fees and expenses incurred in the Dixon V

appellate proceeding . In Dixon VII we awarded appellate

attorney's fees and expenses under section 7430 to Kersting

project petitioners represented in the Dixon V appeals by Porter

& Hedges Attorneys John. R . Irvine (Irvine) and his partner, Henry

G . Binder (Binder), and by Michael Louis Minns (Minns) . In Young

we awarded appellate fees and expenses under . section 7430 to

Kersting project petitioners represented in the Dixon V appeals

by Izen and Jones .

This third set of opinions pertains to fees and expenses

incurred in this Court .during'the remand from Dixon V (Dixon V

remand proceeding),2 which resulted in Dixon VI, supplemented by

Dixon VIII,-determining the terms and benefits of the Thompso n

2Respondent and petitioners represented by Sticht reached a

comprehensive settlement agreement regarding fees and expenses

incurred from 1992 through 2006, including the Dixon :V remand

proceeding, which superseded our award to Sticht's clients in

Dixon IV . On Oct . 4, 2006, we ordered respondent to disburse

$1,254,368 .11 to Sticht's clients in satisfaction of that

agreement . Of this amount, approximately $237,000 wa s

.attributable to fees for the services of Sticht and his associate

in the Dixon V remand proceeding .

- settlement'".',' In . our most .:recent-,,opinions',

Commissioner , . 4132 -T . C .

Dixon v .

(+2009 .) (Dixon -IX),, ; . . and, Gridley v .

Commissioner ,°T .,C .Memo .~ ,,,, 2009-89'(GridleyII) ; we awarded-fee s

and expenses under~section-x6673 (a) ( .2) .'(B) ,for the respectiv e

services of .Irvine, ' .Binder, and other Porter •& Hedges ' attorneys '

and of „Jones ,in the-Dixon V .r remand ;proceeding .:

In this .Memorandum Opinion"`we award fees and- expenses" under .,

section .6673 (a) (2) ,(B) for

.behalf ,of~ othe ! Hongsermeier test=case petitioners-and variou s

test- case petitioners ;.in

opinion will deal'with,the pending motio n

case and .•non-test-case petitioners-t o

expenses

incurred in""the Dixon V,remand' .proceeding ._, .,

Petitioners have submitted an amended request-for-$,967,37 94

in fees and $21 ;525 .99~ain expenses ,-Respondent,,objects to th e

hourly rates and number of,,hours . .,,cla med .as unreasonable ;

re,spondent,-requests substantial reductions :-After-considering petitioners',amended .reques t

respondents', objections-to claimed hourlyrates,we will reduce-

'Petitioners .. dockets' :were consolidated ; in the Dixon V s

remand? proceeding for the purposes of .,hearing ; briefing_ .and

opinion,:with 26 other9docketed . caseslof Kersting projec t

petitioners represented' by . Irvine, Iz'en' Jones ;, :and Sticht .

4Petit ioners' ' . amended fee .,reques t :states .J that,. petitioners

are requesting $967,362 :"21, whereas1,the total hours, listed i n

petitioners ' : amended fee request -multiplied by,the : claimed ,hourl y

rates come . to $967,-379 .

- 7 Minns', hourly rate from $500 to $350 per hour and reduce the

claim for the services of his associate, Enid M . Williams

(Williams), from $250 to $175 per hour . We will allow the

requested hourly rates of $100 and $75 per hour for services of a

paralegal and secretary . The rate reductions alone would reduce

petitioners'. requested award by $285,363 .75 ($229,993 .50

attributable to Minns and $55,370 .25 attributable to Williams) to

$682,015 .25 . 5

In response to respondent's objections to specific items in

various categories of services, we will reduce petitioners'

requested award by a total of 736 .89 hours for Minns, Williams,

the paralegal, and the secretary, amounting to an additional

$197,976 .50 reduction of petitioners' requested fee award, which

would leave petitioners a fee award of $484,038 .75 .

In addition to the above fee reductions attributable to

respondent's specific objections, we Will reduce'petitioners'fee

award across-the-.board by an"additional one-third (33-1/3

percent) of the remaining fee amount, amounting to $161,346 .25,

to reflect "overlawyering" and lack of contemporaneous

documentation . After subtracting this percentage reduction, we

hold that petitioners are entitled to a fee award-of $323,692 .50 .

'Unless otherwise specified, all dollar amounts attributable

to Minns' and Williams' services have been calculated using

reduced rates of $350 per hour for Minns and $175 per hour for

Williams . See infra Discussion, Part II .

We also .reducepetitioners' requested expenses by $6•,236 .44 ,

leaving an ;expense . award of $15,28,9 .'55 .,

Backgroun d

,,The underlying, facts in thesercases areRdescribed ; in Dixo n

II,Dixon~III,Dixon IV ; Dixon VI, Dixon .Vll,

Commissioner ,

Young v. .

T .C# •,MemoF . 2006- .189,• Dixon, VI•II,, .Dixon IX,

an d

Gridley II . The parties,,have provided-additional facts-„in .

petitioners' fee request,

as amended, and respondent' s

objections The partiesshave-not requested an>evidentiary- . ,

hearing,, and, we have found as hearing unnecessary . . Cf .. Rul e

232 (a) (2 )

Kersting,Tax Litigation, Through Dixon V .Reman d

The Kersting tax,,shelter,,litigation arose from . respondent' s

disallowance of-interest , deductions claimed .by participant s

tax shelter . programs , promoted by .Henry , F . K ., Kersting

Kersting ) during the late 1970s andthe 1980s .

(Mr .

Respondent' s

determinations, of deficiencies against Kerstingitax shelte r

participants eventually resulted in the docketing o f

approximately~J .,,800 cases in the Tax .Court., . . Most Kerstin g

project petitioners entered into-,"piggyback agreements with,g

respondent in which they agreed that their cases would b e

resolved in accordance with a small number of test cases .

Hongsermeiers were among,the

9 In Dixon II the Court upheld the deficiencies resulting from

Kersting tax shelter deductions claimed by the test-case

petitioners . On June 9, 1992, after entr y, of the Court's

decisions in Dixon II, respondent's'management .discovered tha t

before trial respondent's trial attorney, Kenneth"W . McWade

(McWade), and his supervisor, Honolulu,District Counsel William

A . Sims (Sims), had .entered into secret settlement agreements

with test-case petitioners John R . and Maydee Thompson (the

Thompsons) and John R . and E . Maria Cravens (the Cravenses) .

McWade and Sims had not disclosed the Thompson and Cravens

settlements to their superiors, the Court, or the other test-case

petitioners or their counsel . The primary purpose and final

effect of the Thompson settlement was to provide the Thompsons

refunds more than sufficient to pay the-fees of Luis-G . DeCastro

(DeCastro), the Thompsons" attorney, to provide the appearance of

independent representation of test-case petitioners in the

test-case trial .

Respondent filed a motion for an evidentiary hearing to

determine whether the secret settlements had affected the .Court's

decisions in Dixon .II . The Court denied respondent's motion for

an evidentiary hearing, entered decisions giving effect to the

Thompson and Cravens settlements, and'allowed to stand the

decisions sustaining respondent's adverse determinations against

the other test-case petitioners . We also denied motions to

10 -

intervene in the Thompson~,and =Cravens ; cases filed by,1zen and '

Sticht on .behalf-of certain ;,test- case . and,,,non-test,-case

.petitioners .

,The 'test-case petitioners _ (other ,than- the . Thompsons and the ,

Cravenses) and the non-.test) case ; petitioners* seeking : to., interven e

appealed rto, the U .. S,.,, Court . of ;.,Appeals,,-for the Ninth . Circuit

Court , of ,Appeals vacated our ; decisions ,in, the test cases ', holding

that an'-evidentiary hearing was needed , to determine ,whether th e

misconduct _of- respondent,',s- counsel had . given,rise to, .-",a

structural defect voiding . the judgment [in ,DixonAIh], a s

fundamentally : unfair,, or whether, , despite ,the government's ; .misconduct, the judgment, cann be upheld' . as harmless- error.!'

DuFresne v . Commissioner , 26 F• .3d at 107 . The ,Court .,of Appeal_s,, x

directed the Tax Court, to hold such a,, hearing, and to consider-the .,

In an unpublished,,,opinion, Adair

.- . Commissioner ,

,v 2 6

(9th Cir : .1994), the DuFresne panel (Goodwin, Ferguson, .and Trott, JJ . ),, affirmed our :denial s, of tithe ..motions _to ,,interven e

the Thompson and Cravens, cases ton? the'ground,that„those decisions .

had 'become `final .

To give of-fect kto• the, ,direction,,of .the -Court-,,o f

DuFresne ,to consider' .thenmerits of aa'l motion s

affected, partiesr, ,a;we~ ,ordered& the consolidation

- 11 cases with the remaining test cases for the evidentiary hearing,

briefing, and opinion required by the Dufresne mandate .

In the course of that evidentiary hearing Ize n

sought discovery of documents pertaining to respondent's conduct .

after the trial of the test cases . Izen alleged, . among other

things, that respondent after May 1992 tried to conceal the

fraudulent conduct of the Government attorneys in the test cases .

We denied Izen's discovery requests, sustaining various

privileges asserted by respondent . See Dixon III, PROCEDURAL

HISTORY OF,EVIDENTIARY HEARING, III .

Initial Evidentiary Hearing , C .

Developments Following

Denial of Mr . Izen's Motion T o

Compel Production of Documents .

After the evidentiary hearing we=issued our opinion in Dixo n

III, generally allowing the Court's decisions in .Dixon II' t

stand and holding'that McWade' s and Sims ' misconduct did not

create a structural defect that prejudiced the Court's decision

in Dixon II but amounted to harmless error . However, we imposed

sanctions against respondent by relieving test-case and non-testcase petitioners of liability for (1) the interest component o f

the addition to tax for negligence under former section 6653(a), .

and (2) the increased interest attributable to the higher rate

prescribed in former section 6621(c) . See Dixon III . On April

1, 1999, 2 days after issuance of our Dixon III opinion, we

referred: the •°misconduct of McWade, Sims, and DeCastro,to the, Tax :'

Court's Committee on Admissions, Ethics,',,, and-,Discipline .

In Dixon IV wemp:osed`additional sanctions ;pursuant t o

section 6673'(a) (2)';(B) by ° ordering respondent . to pay : ,attorney !

fees of -Kersting ,project . ;petitioners, to investigate and ;,preseh t

the evidence of :McWade ' . s .,and ,S'ims' n misconduct : to the Court .

so doing,

we. reduced, the . awardsof ;'fees , requested in ; Dixon IV b y

.one-third across,-the-board to reflect varrious- .failures „of .,proof~ .

The test .case petitioners - again : ., appealed to,, the Court ;o f

Appeals-for the, Ninth Circuit . We also certfiedat the case s

non-test- case . petitioners' represented by, ;Izen, Sticht,4 Jones, and

Declan J . O''Donnell (O'Donnell) for :interlocutory appeal :. » After ,

various procedural delays ;described more fully,=in Young v .

Commissioner ,MOT .C. .+°Memo ; ; 200.6-189, the Court of•Appeals accepte d

the interlocutory appeals ofrthe

nontest,cases but held them i t

abeyance pending resolution-o f

the meantime Minns replaced Izen .as'appellate,attorney

for'=the Dixons,, the -DuFresnes ,,,, :and the °Hongsermeiers

, Later ,

Irvine ..'and .,Binder replacedMinns as appellate attorneys .for .,the .

Dixons'and-the DuFresnes' : ,Minns -remained appellate .attor-ney .for °

the Hongsermeiers, and Izen .:remained appellate .:attorney .for th e

Youngs -and~~ the .Owenses andthe Adair non=test- case petitioner s

13 On January 17, 2003, another panel of the Court of Appeals

(D .W . Nelson ,

Hawkins, and Wardlaw, JJ .')

issued Dixon V (amended

March 18, 2003), reversing Dixon"III and remanding the test

cases . The Court of Appeals held that the misconduct of the

Government attorneys was a fraud on the Court, for which n o

.showing of prejudice was required . Dixon V, at 1046 . The Court

of Appeals directed us to extend the terms of the Thompson

settlement to "Appellants and all other taxpayers properly before

this Court" .

Id .

at 1047 . The Court of Appeals left to our

discretion "the fashioning of such judgments which, to the extent

possible and practicable, should'put'these taxpayers in the same

position as provided for in the Thompson settlement ."

The Court of Appeals took no action on our denial

Id .

n .ll'.

of .Izen's

discovery requests .

On March 14, 2003, another panel of the Court of Appeals for

the Ninth Circuit (Canby, O'Scannlain, and T .G . Nelson, JJ .)

remanded the nontest cases that had been appealed and,held in

abeyance, directing further proceedings consistent with Dixon V . .

By January 23, 2003, Minns had began to pursue disciplinary

actions against McWade and Sims . Following what he interpreted

as a suggestion or order by a member of the panel that heard oral

argument on the appeal that resulted in Dixon V, Minns filed

complaints that resulted in suspensions from practice of McWade

and Sims by the Oregon and Arkansas,-Bars, respectively ,

and .the

IRS Office of Professional Responsibility .

On February -20, _2 0 04 ,, the Tax .Court , ,acting ion the , orders t o

show cause 'and',the-recommendations . of the-Committee o n

Admissions,,Ethics, and,Discipline,¢suspendedMcWade an d

from, practice before-the, Court6 for 2, years .:' In February 200 .4 .,

the ;-Arkansas State , Bar suspended Sims' s „license ,to- .practi ce . law

for I year, . and''in August,2004,, :the .,Oregon,,State-,Bar .suspende d

McWade's license to practice for-.2 years . On June ,9,

2004, the

Director of the IRS Of fices :_,of ;Professional Responsibilit y

suspended McWade and Sims from practice,before the IRS for an y

indefinite :' period . ,

II .

DixonV=Remand Proceeding

On April 23, 2003, the Tax Court received the primar y

mandate ,of the, Count of :,-Appeals ,I (the,-primary mandate ) .vacating

Dixon III :," The primary'mandate required that ;ywe,determine the_~;

terms of the Thompson ,settlement'and enter . decisions that, "t o

6011. July 14 ,

2003 the Tax . Court had accepted .DeCastro' s'

resignation trom the `l-ax court bar .

7On Oct . 9, 2007, and on Jan . l5, 2008, respectivelyMcWade_

submittedt ;a .petition .for .reinstatement and .a supplement ; thereto .

After a hearing and consideration of an additional supplement

submitted ,by'McWade, -the Court ;,.} in .an order' dated June ,, 27, 2008 ,

denied McWade's petition for reinstatement .

"On-June `2, . 2003, the Court received the supplementa l

mandate of the Dixon V panel, directing the Court to act on "

petitioners', appellate fee requests .

15 the extent possible and practicable", would put Kersting project

petitioners in the same position as provided for in the Thompson

settlement .

On April 30, 2003, respondent filed a motion for a status

conference . On May 1, 2003, the Court ordered the parties t o

file status reports by May 30 .

By or around May 30, status

reports-were received from all participating counsel, including

Minns .

As described in the background statement of Dixon IX,

counsel for all represented petitioners informally agreed that

Porter & Hedges would, in effect, serve as lead counsel in the

Dixon V remand proceeding . Through Binder, Porter & Hedges

played the lead role, in presenting the petitioners' case in-the

Dixon V remand proceeding .

Houston Status Conferenc e

On July 7, 2003, we scheduled a status conference, to be

held in Houston on August-18, 2003 . On July 11, 2003, we

ordered the . parties-to file-reports of their suggestions for

the agenda of that status conference . By August 12, 2003,

counsel for the petitioners whose cases had been consolidated

for the Dixon V remand proceeding filed their reports . O'Donnell

asserted in his report that Kersting project petitioners whose

cases had been closed by stipulated decisions (the closed cases )

- 16, should also "be entitled to, the benefit of the Thompso n

The Houston status conference lasted 2 days . Minns appeared-,,.

and spoke on the f .irst,,day of the conference ,Williams alon e

attended the second day•but had . no occasion to speak .

At the Houston•status•conference'it became,obvious-that th e

parties were, in substantial= disagreement about the terms, of the- .

Petitioners contended that the Thompsons, .

received, tax benefit's from ,the, Thompson settlement . that wen t

beyond the stated terms -ofthe, settlement, and decision documents .Petitioners .also . asserted .that= those benefits extended

taxable ::

years of .the Thompsons' other ; than 19,79, 1980, ._ ..,and 1981, n-the '

taxable years at ;issue ;'in-the Thompson• testacases .

.9Several Kersting project petitioners whose cases,had been

closed by stipulated decisions subsequently . filed or attempted . to .

file motions for leave to file motions to vacate those decisions .

In Hartman~iv . Commissioner , T . .C . Memo . . 2008-124 ;(Hartman ., :I) ,

reconsidering and superseding Lewis v . Commissioner , T .C . Memo . .

2005 7 205,, weheld that the Thompson settlement sanction will^be ,

imposed against respondent in the docketed cases of all Kersting

project'petitioners in which stipulated decisions,, were, entered on .,,

or after ;June 10, 1985, .the commencement date-of the Court's,

Honolulu trial session at which the Court and representatives 'of,

the parties agreed to use the test-case procedure . . In, Hartman v .Commissioner, .' T .C ., Memo . 2009-12 .4 - (Hartman II) , we, ; granted •in

part motions for reconsideration insofar as they concern the

mechanics of implementing the sanctions against respondent in th e

closed cases .

- 17 B.

Los Angeles Status Conference and Thompson Tax Records

for Years Other Than 1979, 1980, and 198 1

Because the parties could not agree on the terms and

benefits of the Thompson settlement, further evidentiary

proceedings were required ; we scheduled another status conferenc e

for September 5, 2003,

in Los Angeles . At this conference Jones

complained that respondent had failed to provide transcripts of

the Thompsons' tax records . Jones argued that these records were

needed to determine whether the terms and benefits of the

Thompson settlement extended beyond the years 1979, 1980, and

1981 .

Las Vegas Special Session

On April 13', 2004, we issued a scheduling order, setting the

first session of the evidentiary hearing for September 20, 2004,

in Las Vegas . The order stated that the hearing was to be held

for the sole purpose of determining the terms of the Thompson

settlement . The order further stated'that neither appellate fees

nor the closed cases would be addressed during the evidentiary

hearing .

On September 10, 2004,'respondent's counsel, Henry E .

O'Neill (O'Neill), informed petitioners that, on September 9,

2004, he had found the Thompsons' tax records and returns for the

years 1983 through 1989 . Petitioners cited O'Neill's delay in

providing these returns as further evidence of respondent's

18 efforts to prevent : disclosure of,th e

former . counsel ' s mis conduct .

On September 20 through 22,

scheduled hearing. session in La s

day of the hearing .

Soon after . the session began, Minns requested the"Court' s

Federa l

assured the Court that Williams woul d

remainder of the session . We granted Minns' request .

During the .afternoon of the first day of the hearin g

`session ; Minns requested the Court's permission to allow To m

Snell (Snell), an accountant,

counsel's table .,

to take Minns' seat at petitioners .' ,

Minns explained that Snell ,

whose expertise had been sought to establish evidence .

supporting petitioners' theories, would assis t

matters related to accounting . The Court allowed Snell

Minns' seat . at the counsel table, and Minns sat with th e

audience .

Williams attended the second and third days of the Las Vega s

hearing session in place of Minns . Williams sat with the .

audience ._and did not question any witnesses or otherwise appear .

to participate actively in the proceeding .

19 D.

Los Angeles Special Sessio n

Many factual issues remained unresolved after the Las Vegas

hearing session . On October 6, 2004, . the Court issued a

scheduling order continuing the hearing to November 22, 2004, in

Los Angeles .

Williams rather than Minns attended the Los Angeles hearing

session . Williams' only active participation in the session

was signing a stipulation of facts on behalf of the Minns Law

Office . Otherwise, she sat with the audience during the hearing .

According to Williams' timesheets, she spent more than 8

hours at the hearing and conferring with counsel on November 2 2

and more than 10 hours at the hearing and meeting with a client

on November 23 . The hearing session followed by ,a brief meeting

in chambers lasted no more than 4 hours on November 22 .

Washington, D .C .,

Opening Brie f

Special Session and Petitioners'

On February 3, 2005, petitioners through Binder filed a

motion for a third and final evidentiary hearing session .

February 4, 2005, we issued an order setting the final hearing

session to begin March 29, 2005, in Washington, D .C . .

On March 29, 2005, in-Washington, D .C ., we began th e

final 2-day session of the Dixon V-evident i.ary-hearing . Williams

attended in Minns' place and did not actively participate . ,

On the second day of the Washington, D .C ., session, the

- 20 -

Kersting project petitioners .~agreed to .submi t

pintopenin g

brief~° for .which Binder would :do most of thea .work Counsel _ for

respondent and-the-Kersting project petitioners further informed .-

the Court ; that they. agreed that attorney' s .fees incurred ,durin g

the Dixon V remand proceeding should be awarded under sectio n

6673 (a) (2) . rather-than section 7430 .

F . - ; Our Determination, of Scope ofeThompson Settlement . an d

Awards of Appellate Fee s

On July 14

2005 Binder filed a 189 = page joint openin g

brief'-signed .by all petitioners' counsel who had participated•,in .

the Dixon V remand, proceeding . Among the myriad issues addressed . .

in'this, brief were the treatment of the section 6651'(a) (1 )

addition to tax\as aterm of the Thompson settlement and th e

cutoff . date of deficiency interest accruals against Kersting

project petitioners, as well as petitioners' primary argumen t

that the overall percentage reduction in deficiencies .-provided .by

the Thompson settlement amounted to approximately .80,percent

On July ;l4 2005 Sticht filed a nine .-page supplemental <

brief , arguing efor an-x-87 -percent reduction,,-in deficiencies and - ant ,

earlier, cutoff date,Pfor interest accruals on, .the deficiencies .

On Julyw15

2005 .,=Jones ,, O' Donnell, and Izen filed = a,21-page d

joint supplementalbrief . arguing primarily . that the Court shoul d

:impose as °a sanction,a 100-percent reduction in ' the deficiencies

on respondent . Minns did not file a supplemental brief .

- 21 On May 2, 2006,

we issued our opinion in Dixon VI ,

explaining our determination of the terms and benefits of the

Thompson settlement, including a 63 .37-percent reduction . of the

Thompson deficiencies . In Dixon VII .and Young v . Commissioner ,

T .C . Memo . 2006-189,'issued May 10 and September 6, 2006, .

respectively, we awarded appellate fees and expenses under

section 7430 for services through April 30, 2003, the date

respondent filed the motion for a status conference .

Minns' Motion for-Reconsideratio n

On June'6, 2006, Minns, on behalf of the Hongsermeiers,

filed a motion for reconsideration of our opinion in Dixon VI .

Minns' motion presented tworarguments ._ First, Minns argued that

the Court-should have cut off interest on .petitioners'

deficiencies commencing in 1986 with the inception of'the fraud

and not 1992, in accordance with respondent's concession, and

should have handled the section 6651(a) late-filing addition

differently . Second, Minns argued that the Court's opinion in

Dixon VI did not adequately address later misconduct of

respondent' s ; attorneys .

On September 7, 2006, we issued Dixon VIII, responding to

the Hongsermeiers' motion for reconsideration filed by Minns .

With regard to Minns' first argument relating to the cutoff of

interest and treatment of section 6651 additions to tax, we cited

Estate of Quick v . Commissioner , 110 T .C . 440, 441 (1998), and

22 noted that . we had fully .addressed these issues in,Dixon .VI,l,° an d

we declined to do anything further

; Dixon VIII n . .3 ;,see also ,

Stoody v . Commissioner , 67 T4-C .-,-643,,,-644 (1977)„ ; ' Lowry

Commissioner., . , .T . C . Memo . 2004-10 ; . Estate 'of :Scanlan-• :v

Commissioner,

T .C .'.Memo .- 1,996-414 .

We responded . to 'Minns' second argument _ that x.we shad, notro ,

determined . the "full, extent .of . ;,the wrong done by the government ;

trial lawyers" .by-notingthat _!Izen,,~Jones, :,and .O.'Donnell ha d

-further inquiries would violate< the '\law o f ;

the` case"

and- "rule !.of . mandate" ,established by the Court , :o f

Appeals for the N.inth ;.Circuit in Dixon V .

III .

The Minns Law Office'" Dixon V Remand-Proceeding Fee an d

Expense Requests

Respondent, in a

had suggested that petitioners '

counsel submit their fe e

applications for services in the . Dixon V remand proceedin g

respondent for review befor e filing them with the Court .

Respondent indicated that "the possibility exists tha t

10Minns' arguments had been previously argued in Binder' s

July 14 .,- 2005 ; opening brief (arguing, in : section IV, subsections

D and `E that petitioners were entitled to interest and penalt y

unin in,Jones',Jul y l the5Co2005, supplemental brie f

urt had not determined`

(arguing

"depth of respondent's counsel's fraud") .

23 -

agreement could be reached at least with respect to some portion,

and conceivably all, of the fees requested in a particular .

application" .

Sticht and Irvine responded to this invitation timely by

providing contemporaneously created time' sheets and expense

records to respondent . In October 2005 Sticht began to provide

respondent with timesheets and invoices reflecting work performed

and amounts paid by his clients . In June 2006 Irvine began to

forward time sheets and other documentation to respondent for

review . Sticht and-Irvine were thereby able to reach agreement

with respondent on the reasonable amounts of their fees and

expenses well before we set the time for filing all petitioners' .

fee and expense requests ."

On May 4, 2007, we ordered all participating petitioners to

submit requests for attorney's fees and expenses incurred in the

Dixon V remand proceeding by June 8, 2007 . On May 29, 2007,

Jones filed a motion, which we granted, to extend the time to

file all such requests to July 8, 2007 .

Minns did not initiate contact with respondent's counse l

on the subject of a negotiated fee and expense award-until afte r

our order of May 4, 2007 . Because Minns had not prepare d

"With respect to Sticht' s fees and expenses , see supra note

2 ; with respect to Irvine' s fees and expenses , see Dixon IX .

- 24 contemporaneous-timesheets .or sent client invoices_ :but,was ,

• attempting to, prepare ; timesheets on the basis . of, Porter,&Hedge s

records, respondent told Minns that it would not be possible to .

r before the deadline for filing fee7applications

and,that, Minns-° should file his ,fee application with the,`Court .

On-June 12, 2007,,Williams filed petitioners'-request ,

for an award of attorney' ;s "fees on behalf of,-the Hongsermeiers .,12

Thee request covered fees from January 20, 2003, through-May . 23,

2007, and,requested-a total of $1,006,629 .85 in-,fees and

$21,363 57 .irix"expenses

:Included with the request . was an

84-page, form ~,of .bill dated ..June 8, 2007, addressed,to th e

Hongsermeiers .

On July 5,, 2007, respondent filed a response t,

,petitiooner s

request ; °for an ., award,, of attorney's fees and,expenses, noting

numerous,errors and-inconsistencies in petitioners'' .request~4

of June,12, 2007 .!- ;For example, according to petitioners, fee

and expense application . entry for October 31, 2005•, Minn s

and Williams each worked 30 hours that day . Several other °

entries ;conflicted-with"entries in Binder's and Irvine'

timesheets,=from which Minns and .Williams derived .muchthe information-used to, reconstruct -their timesheets ., . ,

12Williams was admitted to the Texas bar in 2001 . Sticht's associate`BorisOrlov was admitted to the California bar in 2002 ;

Sticht : .chargedan& respondent agreed to $1,75, per hour . as the. rate

for Orlov's_services in the . Dixon V remand proceeding

- 25 Moreover, according' to,-respondent,-,many of the entries i n

petitioners' fee and expense request placed Minns or Williams

at events for which they were not present . With the response

respondent submitted Exhibits A through J listing respondent'sspecific objections grouped by category .

On September 17, 2007, Williams filed petitioners' reply to

respondent's response to petitioners' original fee and expense

request as well as an amended/ fee and expense request (unless

otherwise specified, all references to a fee request are to th e

amended fee and'expense request) . In their amended request,'

which included another form of bill (85 pages) to the

Hongsermeiers dated August 29, 2007, petitioners reduced their

requested fee award to $967,362 .21 but slightly increased the

requested expense award to $21,525 .99 . In so doing, petitioners

corrected some of the inaccuracies described in respondent's

response . For example, the entries claiming'Minns and Williams

had each worked 30 hours on October 31, 2005, were each changed

to 30 minutes . Petitioners also conceded that they should not

receive any award for fees awarded in Dixon VII, but they did not

concede that they should not receive an award for appellate fees

that they had not presented for our . consideration in Dixon VII .

In the original request for fees and expenses of June 12, .

2007, and the amended request of September 17, 2007 ., .Williams

asserted that the Hongsermeiers are or remain liable for the

- 26 -

requested fees under,an executed contract with-the ,MinnsLaw ,

The original and amended request included requests fo r

"such,, ` fees for fees ' as they have-shown and will-show-'to , thi s

* * interest on such,fees and . expenses ,beginnin g

January 17,

2003, the day the Ninth Circuit Court of Appeal s

Dixon VI was filed" . The, ;Hongsermeier test-cas e

petitioners have never filed a,supplemental request-for ;"fees ;,, for .

Petitioners °reply%repeated the assertion that th e

Hongsermeiers "are .- :personally liable for massive .= legal fees ",,; .

but also statedthatx"they are currently joined by thirty- nine', '

piggybackers, who helped finance the case . post {Dixon ,V]"'

On September 25, .2007, we ordered petitioners ..,to ;

supplement their amended fee request by filing a copy Fof . . the

fee agreements between the . Hongsermeiers . and Minns,,with respect

to the Dixon V remand ; .proceeding . On October 1,x,2007, ;

petitioners complied in part with . that order by filing a

;

form of-fee agreement with =petitioner Richardd Hongsermeier

,(Fiorella Hongs .ermeier . .is not included as a party and ' th e

agreement•;is`signed and .dated March 3, 2003 ;, by Richar d

Hongsermeier but not . by Minns) . The agreement provides for-the ,

payment , of, an,up-front fee . of $3,500 plus a monthly , fee . pf $100

until .the,case has been-concluded . The agreementa,,contemplates .a"

similar,arrangement,with at least 30 non-test-case petitioners .-a,

27 Although Williams asserts in the September 17 reply that "thirtynine piggybackers" have signed up, as yet there is no evidence in

the record of the number and identity of non-test-cas e

petitioners who may have joined in this arrangement or of

amounts they have actually paid Minns for work done in the

Dixon V remand proceeding .

Other salient terms of the Hongsermeier fee agreemen t

include :

Accounting . There will be no charges for work

already done .

Fees . * * * Client is responsible for all legal

fees on remand . *`* * Client will be credited for

* * * payments (by other persons who sign up ]

but remains liable for payment of the entire

legal fee .

Rates . The rate for Michael Minns is $500 .00 per

hour . The rate for Enid Williams is $250 .00 .

The rate for paralegals is $10 .0 .00 per hour .

The rate for secretaries is $75 .00 per hour .

Covenant . The client agrees and covenants

that :

2 . Understands that this agreement is

entered into because the Firm expects

to make a profit on-this leg of the

case .

3 . The Client understands that the Firm

may earn substantially more than its

normal hourly rate under this agreement

or substantially less . . . . The Firm

will pursue it [disciplinary proceeding

against IRS attorneys]'for the public good .

On October 9, 2007, respondent filed-a response

petitioners .'

amended fee and expense request ; on October 12,

28 2007, respondent filed a supplement to the October 9,p200 7

respons e

Respondent observed in the October 12, 2007, supplemen t

that in `all likelihood the amounts in the amended request for ,

fees and expenses substantially exceeded what Minns', clients had

actually-paid or were obligated to pay . Respondent , argued . that, .

these excess amounts had, therefore not been "incurred" within the

meaning of section 6673(a)(2)(B) . This is an argument that,we

have rejected in Dixon IX with respect to the Porter & Hedges fe e

arrangement to represent the Dixons and the,'DuFresnes'in th e

Dixon V,remand"proceeding without cost . to them .

Our remaining tasks are to examine respbndent's-general,

objections . to the billing rates claimed by petitioners for, the

`services of,Minns and his staff, respondent's ,, specific, objection s

,entries for„time allegedly spent (and related expenses) a s

unrelated to the,Dixon V remand proceeding, and the reliabilit y

of documents submitted with petitioners' fee request ; we conclude

-by addressing,4"6verlawyering" .with respect to the time ..'remaining

after we have addressed respondent's general and specifi c

objections .

Discussio n

I . . ` Application' of Section 6673',(a) (2) (B )

The part .ies,agree that attorney 's fees and expenses shoul d

be awarded under section 6673(a)(2)(B) with respect-to a 1

29 petitioners who, participated in the Dixon V remand proceeding .

Section 6673(a)(2) provides :

(2) Counsel's liability for excessive costs ..-Whenever it appears to the Tax Court that any attorney

or other person admitted to practice before the Tax

Court has multiplied the proceedings in any case

unreasonably and vexatiously, the Tax Court may

require-(A) that such attorney or other person pay

personally the excess costs, expenses, and

attorneys' fees reasonably incurred because of

such conduct, o r

(B) if such attorney is appearing on behalf

of the Commissioner of Internal Revenue, that the

United States pay such excess costs, expenses, and

attorneys' fees in the same manner as such an

award by a district court . A.

General Rule s

During the Kersting tax shelter litigation this Court has

,awarded attorney's fees and expenses under section 6673(a)(2)(B)

incurred in proceedings .in this Court--Dixon IV, Dixon IX, and

Gridley II--and under section 7430 for fees and expenses incurred

in the Dixon V appellate proceeding--Dixon VII and

Young V .

Commissioner , T .C . . Memo . 2006-189 .

In Dixon IV, Dixon VII,

Young , and Dixon IX, we explained

the distinction between fee-shifting prevailing party statutes,

such as section 7430, which are based on substantive policy-that

prevailing private parties .should be able to recover fees and

expenses from the Government in certain types of cases, and-fee

sanction statutes, such as section 6673(a)(2), which emphasize

punishment and deterrence of litigation misconduct by both

- 30 private-and Government attorneys . See Chambers,v . NASCO, Inc .

501 U .S . 32, 52 (1991) ;

Bus . Guides, Inc . v . Chromatic Commcns .

Enters ., Inc .,, 498,.U- .,S . 533 (1991) ;

Corp .,

Cooter & _Gel1Y,v . Hartmar x

496 .;U .S . 384,,,409 (1990) . Fee sanction statutes, such a s

section 6673(a) generally are designed to punish-and deter ,

litigation misconduct of the parties, and section 6673(a)(2)(B)

in particularis, designed to punish and'deter the misconducto f

the Commissioner's counsel . Section 6673(a)(2) also requires

that the 'fees and expenses awarded be reasonably related to th e

conduct,giving,,rise to the sanction . .

Both section 7430 and section 6673(a)(2) limit the award to

.reasonable fees and expenses . However, fee-shifting statutes,

such as section 7430, impose additional limitations that do,not

apply under .the,,fee_sanction statutes, placing an hourly rate ca p

on fees, imposing , a net -worth'limitation on taxpaye rs requesting .

reimbursement, ands allowing awards to, be made only, „in favor .,of {`

prevailing private parties .

Meaning of "Incurred" Under Section 6673,(a)(2)(B),,,AII

addressing hourly rates and respondent's objections

to time spent ., we summarily dispose of, respondent's argument that

we,should : reduce the award because some .portion of the,fees ;,and,, ,

`expenses requested has not been "incurred" within the meaning of`,

section, 6673 (a) . (2) ,(B) . Respondent argues . that the fees and

expenses .<requested have not been "incurred" to the-extent the y

- 31 -

exceed amounts paid or payable by Minns' clients for legal

services in the Dixon V remand proceeding .

This is the same argument respondent made in Dixon IX, that

the fees and expenses claimed by Irvine on behalf of his firm for

services in the Dixon V remand proceeding had not been "incurred "

under section 6673(a)(2)(B) because Irvine on behalf of his firm

had agreed with the Dixons and the DuFresnes to represent them in

the Dixon V remand proceeding at no cost except for such fees and

expenses as might be allowed by the-Court . In Dixon IX we

rejected respondent's argument, relying on both section

6673(a)(2)(B) and our inherent power, to hold that respondent had

incurred the obligation to pay those fees and expenses as

,result of the misconduct of his attorneys . By a parity of reasoning, we reject respondent's similar

argument in the case at hand . If and to the extent it should

turn out that the reasonable fees and expenses respondent is

otherwise obliged to pay exceed the total amounts paid and

payable by Minns' clients, we hold that respondent will be

obliged to pay Minns the excess .1 3

13Our conclusion in this regard renders moot our doubt that

the Hongsermeiers ( who filed net worth affidavits in connection

with Minns' request for appellate legal fees under sec . 7430)

have ever actually been obligated to pay the full amount of

Minns' fees and expenses for services in the Dixon V remand

proceeding . One o,f the orders we shall issue with this opinion

will require Minns to set forth and substantiate the amounts paid

by the Hongsermeier test-case petitioners and his other clients

for services in the Dixon V remand proceeding , pursuant to fe e

(continued. . .)

We'now award fees under section 673(a) (2) . (B) for oservi.ces ;

Minns and his staff performed in the Dixon V remand proceedin g

To fix a fee award under section 6673 ( a) (2), (B) , we multiply .th e

hours reasonably expended by the attorney s -reasonable i

Pennsylvania v . Del . Valley Citizens' .Council ; 4786, 563 : (1986) ;, Hensley v . Eckerhart , 461U . .S . . .424, .433 c

,(1983) .,. . To calculate the fee award for Minns', services, .,we-=firs t

determine reasonable hourly rates for Minns and his-~ staff, and, .,,

then determine the number of hours Minns reasonably expende d

,the remand-,proceeding .

. Reasonable=Hourly Rate s

,The hourly rates petitioners claimed for Minns and,his

staff, which respondent argues are excessive,, are as,follows , ,

500 per hour~forwMinns' services, $250 perhour for Williams '

services,>~$`100 per hour for the paralegal's services, and,$ .75_pe r

hour .' forxthesecretary.'s services . . For the,reasons discussedbelow, we hold that,,, Minns'

and Williams' claimed - rates;,,ar e

unreasonably # high sand should be reduced , and that . the ,paralegal',,s

and the secretary ' s claimed rates should be allowed to stand W e

reduce . Minns' rate to $350 per hour and Williams' . rate-',to $175 ,

1 3,

.continued),

and expense ; agreements and otherwise Minns'y,responses`to thi s

order will . enable us to determine the amounts of reimbursements

.payable - to ;, Minns , .<nvarious clients and the exces s .amount, if any,

payable)to Minns .

33 The reasonableness of an attorney's hourly rate is

determined by the amount that attorneys of like skill in the area

would typically be entitled to for similar work . Harper V_

Commissioner , 99 T .C : 533, 551' .(1992) . To determine a reasonable`

hourly rate for services of Minns and his staff, we first'10-okWto

the billing rates of his fellow, attorneys in the same matter, the

Dixon V remand proceeding .

Minns' and Williams' Hourly Rate s

Like Minns, Attorneys Jones, Sticht, and'Izen represent

private clients from around the United States in tax controversy

work . Like Minns, each of these other attorneys is a sole

practitioner who'served as the primary litigator on behalf of hi s

clients, with assistance from an associate attorney and othe r

support staff . Jones, Sticht, and Izen all charged $350 per hour

and Sticht charged $175`per hour for the services of hi s

associate Boris Orlov (Orlov) in the Dixon V remand proceeding .

We use the hourly rates of these attorneys and associate-as

guidelines in determining . the proper hourly rates for the

services of Minns ..and Williams .

Services provided by Binder and Irvine (the attorneys of

Porter & Hedges) are not directly comparable-to those provided by

Jones, Sticht, Izen, and Minns . By informal agreement of all

counsel, Porter & Hedges, through Binder, played the lead role in

representing all petitioners in the Dixon V remand proceeding .

Porter & ,Hedges is a mid-sized law firm (approximately 100

34 lawyers),,withe-greater resources and correspondinglygreater

overhead costs . - . .Despite Binder's role as lead counsel,, his~, .

average rate,,,$367 .50 per hour, was not much greater than they„

hourly,. rate ,ofa ;,;Jones , :. Sticht, and Izen .

. Irvine ' played . a

restri.ctedgrole .as Binder's managing/,reviewing' .partner°°at Port.er

;',=we ;regard Irvine's higher average hourly rate : ; ., $425' pe r

',&-Hedgs

hour for far ;fewer hours, as appropriate .1 4

Although office location can be a factor i

reasonable hourly .~ rate ,

determining' a

it does not outweigh , the similarities i n

the nationwide,services provided by Jones ; Sticht,_Izen,

and ,ti,

'Minns . While the offices of Porter & .Hedges, Minns,,and Izen'are

all in or ; nearHouston,_Texas, the offices of,,Jones and-,,Sticht

are in .,Las -Vegas ,and . Los ,Angeles, respectively . ; °.. If :we-,were ; to

.give office-location . some weight, Minns' services would, :be mor e

comparable to .the services of Binder and Irvine than, ;,to,,those,of

Sticht, and- Jones . , .However, Izen' s office is, . also in . . the Houston ,

area, andMiftns' : :-services during the Dixon V - remand ; proceeding

were,more. like`, Izen'•s services than the servicesa-,of Binder . and ;

Irvine . 'The similarities in the practices of ..Jones,= . .Sticht, .

Izen ;,and,,Minns, the similar roles of each in the,Dixon,V remand

proceeding'; and the consistency of the hourly rates . of=Jones '

Sticht, and',Izen-outweigh the significance of any differences in °

their7office`locations . Office location is not a factor that ,

14We note that respondent did not object to . Irvine's and-

Binder's, .-hourly-rate s' .

35 influences our holdings of reasonable hourly rates for Minns and

Williams .

Minns' allowable billing rate should approximate or equal

the rate charged by Jones, Sticht, and-Izen : Williams' hourly

rate should be'irn the same range as the rate Sticht charged for

Orlov's services` The hourly rate petitioners request-for Minns'

services, $500 per hour', is substantially greater than the $350

hourly rate Jones, Sticht, and .Izen charged for their services,

and the rate petitioners request for Williams' services, $250 pe r

hour, is substantially greater than the $175'hourly rate Sticht

charged for Orlov's services . The rates petitioners request for

Minns' and Williams' services in the Dixon V remand proceeding

exceed the rates that "'attorneys of like skill in the area would

typically be entitled for a given type of work'" ., See Harper v .

Commissioner ,

supra at 551 (quoting City of Detroit v . Grinnell

Corp . , 495 F .2d 448, 471 (2d Cir . 1974)) .

We conclude that the reasonable hourly rates for Minns's

and Williams' services are $350 and $175 per hour, respectively .

Paralegal's and Secretary's Hourly Rate s

Petitioners request $100 per hour for paralegal services and

$75 per hour for secretarial services . Because the rate charged

for Minns' paralegal's services ($100 per hour) is lower tha n

both the rates of Jones' paralegal ($120 per hour) and Porter &

Hedges' paralegals ($130 per hour), we conclude that $100 per

36 hour should be allowed to stand as a reasonable'rate,,for-Minns' •

1Minns', legal secretary provided some services .similar,to,

thoser,performed by the paralegal, such as .drafting . . some .legal

documents .,It,would not be unreasonable to charge•$75 .an hour;

for services,bf . ,the ,secretary for which the paralegal - charg e

would,be,$100„an hour. We conclude that $75 per hour i s

reasonable rate for Minns' secretary for the performance .,of

paralegal,type services . The schedule immediately :,foll.owing,_

reflects petitioners' amended fee request before and . after

applying the reduced rates for Minns and Williams : .

Befo r e

Minns

.William s

Paralega l

, .Secretar y

Total

Hours

Rate

Tota l

Rate

1,533 .29

738 .27

124 .18

49 .98 "

2,445 .72

$500

250

100

$766,645 .0 0

184,567 .5 0

12,418 .0 0

3,748 .5 0

967,379 .00

$350

175

100

75,

After , P6

Tota l

. F" W

$536,651 .510 .

129,197 .2 5

12,418 .0 0

3,748 .5 0

682,015 .2 5

The above reductions in Minns' and Williams' hourly rates reduc e

petitioners overall request by $285,363 .75,($967,379 .00 minu s

$682,,015 .25 equals $285 ,363 .75) .

III . .

Hours Reasonably Expende d

To determine the number of hours Minns and his staff-

reasonably expended on the Dixon V remand proceeding, we .must

first eliminate-entries that are clearly unreasonable .

Respondent argues that we should reduce petitioners' requeste d

'award'because certain categories of fee entries are unrelated t o

the Dixon V remand proceeding or are otherwise excessive or

- 37 duplicative and because Minns' time entries and billing records

are unreliable .To be compensable, hours expended in litigation must be

reasonably related to the Dixon V remand proceeding and Must not

be excessive or duplicative of other counsel's efforts . See

Hensley v . Eckerhart , 461 U .S . at 434 (courts need'not award fees

for services for which attorneys should not bill their clients) ;

Saizan v . Delta Concrete Prods . Co . , 448 F .3d 795, 800 (5th Cir .

2006) (duplicative work efforts are an abuse of billing

LaPrade v . Kidder Peabody & Co . , 146 F .3d 899,906

judgment) ;

(D .C . Cir . 1998) ;

Napier v . Thirty or More Unidentified Fed .

Agents , 855 F .2d 1080, 1094 (3d Cir . 1988) ; see. also Amlong &

Amlong, P .A . v . Denny's, .Inc . , 457 F .3d 1180, 1190 (11th Cir .

2006) ;

Gillespie v . Commissioner , T .C . Memo . 2007-202, affd .°29 2

Fed . Appx . 517 (7th Cir . 2008) ;

Kenny A . v . Perdue , 4 .54 F . Supp .

2d 1260, 1286 (N .D . Ga . 2006) (referencing the analogous language

of 28 U .S .C . sec . 1927), affd . 532 F .3d 1209 (11th Cir . 2008) .

Preliminary Comment s

Before we address respondent's arguments that certain fee

entries are unrelated to the Dixon V remand proceeding or

otherwise excessive or duplicative, and then the ; reliability of

Minns' time records, we make some general comments about

excessive and duplicative efforts in the Dixon V remand

proceeding . .

38 On„reflection,, it appears to us that we permitted, ..the :~Dixon :

V remand proceeding to become "over-lawyered" .15 In, .the absence

of any objection or contrary suggestion by respondent, .we

consolidated'27 Kersting project cases and allowed test- casepetitioners represented by Izen, Minns, and,Irvine andx .Binder,,and

non-test- case . petitioners represented by Izen, Sticht, and Jones,

and .O'Donnell ..tto participate in the Dixon V remand :proceeding,

-the same_,27, cases we had consolidated for the purpose, of the

earlier DuFresne ,remand in response to the DuFresne panel's .

directive : regarding efforts to intervene by affected .parties . r

In retrospect, the interests of economy and efficiency migh t

well,havefbeen .better served if we had issued an order, .to show,

cause why : participation in the Dixon V remand proceeding should ;

. not ; be" limited ;, to test-case petitioners as they had been, ,

represented by three sets of attorneys in the Court-of Appeals .,i n

15The table below summarizes the hours and 1egal'' fees and

expenses (by firm and in total) Kersting project petitioners have

requested for attorney services in the Dixon V remand proceeding :

Hours

Attorney

Jones

Minns'

Izen

Porter &

Hedges'

-Total

Fees

2,246

2,245

$265,717 .45

967,362 .21

748,674 .14

2,696

8,342

980,337 .75

2 ,962,091 .55

1,155

Expenses

$15,965, .97

Tota l

°$281,68 .3 .4 2

21;,525 . 99

38,248 . 06

988 , 888 .2 0

57,204 .83

132,944 .85

1,037,542 .5 8

3,095,036 .40 ,

786 ,922 .2 0

In addition, respondent agreed that non-test-case petitioners,_

represented by Sticht were entitled to recover fees and expenises

on the order of 764 hours and $237,000 for services of Sticht,and

Oriov in the Dixon V remand proceeding (Oct . 4, 2006,'order) .

See supra note 2 .

39 the appellate proceeding culminating in Dixon V .16 Or,-if we had

been sufficiently prescient to foresee, and flexible enough to

respond to, the leading role that Binder would play in the Dixon

V remand proceeding, we might have had Porter & Hedges attorneys

provide exclusive courtroom representation, .relegating other,

counsel to consulting roles and a "watching-brief" . Cf ., e .g .,

AARP v . EEOC , 873 F .2d 402 (D .C . Cir . 1989) .

Allowing so many attorneys to participate actively in the

Dixon V remand proceeding created an atmosphere in which some

attorneys needlessly duplicated each other's efforts . We remind

counsel that it is an exercise of poor billing judgment to charge

clients for excessive or duplicative efforts . We need,not award

fees where counsel have abused their billing judgment by

attempting to charge for needless duplications of the efforts o f

other attorneys in the case . We think that Minns has abused his

billing judgment and that the fees and expenses petitioners claim

are excessive and duplicative, even after giving effect to the

bulk of respondent's specific objections . See

infra Part III .D .1 7

"In the Dixon V appeal proceeding, briefing and oral"

argument was limited by the Court of Appeals to the test-case

petitioners, represented by Izen (Youngs and Owenses), Minns

(Hongsermeiers), and Binder and Irvine`(Dixons and Dufresnes) .

Non-test-case petitioners, represented bar Jones, Sticht, Izen,

and O'Donnell, were relegated by the Court of Appeals to a

watching brief .

17We note that, unlike Sticht's request, Minns' request

shows no evidence that Minns actually prepared contemporeous

timesheets or that he actually'billed his clients for work in th e

(continued . . .)

- 40 Reasonably Related to Dixon V Remand-Proceedin g

I now turn to fee entries that respondent specificall y

objects to, on the ground that they are not reasonably related t o

the remand proceeding : (1) The appeal of Dixon' III ; '(2),

collection,'bankruptcy,`and probate matters ; (3) 'disciplinary ,

proceedings against McWade and Sims ; (4) a Freedom of Information

Act lawsuit ; (5) client relations ; (6) petitioners'' June76, ~ 2006,'

motion for reconsideration ; (7) consultations with L .T . Bradt ;

(8), 'investigative research in connection with former Commissione r

of,'Internal Revenue'Joseph Nunan ; (9) a billing-`dispute between '

Minns and Jones

( 10)' the closed cases ;

(11) ove rhead expenses ; '

(12) 'inadequately described entries ; and (13) others miscellaneous

Fees Incurred During Appeal of Dixon II I

Respondent objects to petitioners' original fee request for '

160 .39"3 'hours of work, amounting to $41,773 in

fees, as well as

( . . . continued )

Dixon V remand-proceeding at any time before Williams,was•,abou t

to tile Minns, tee requests witn the court .

~18Two of .,petitioners' amended request entries are-included

in°this,figure and are not related to services provided,in

connection with the appeal of Dixon III . The two entries are~fo r

1 .5 hours for both Minns and Williams on August 21, 2009, for :

services provided in connection with the Hongsermeiers' appeal o f

our-Dixon .-I V,and-.Dixon VIII opinions . Because these , requested

fees, ;-as well. as•the .requested fees for work .done on the .appeal- ,

,.of~Dixon .III, are requests for fees concerning appellate matters

'outside the scope of this case we deal with them together .

- 41

$162 .42 in expenses, for services provided in connection with th e

appeal of Dixon III, as follows :

Rate

Hours

Minns

Williams

Paralegal

Secretary

$350

175

100

82 .68

68 .17

7 .59

1 .95

Expenses

'Total

-160 .39

Amoun t

$28,938 .0 0

11,929 .7 5

759 .0 0

146 .2 5

162 .4 2

41,935 .4 2

Respondent argues that these fees are not related to the

Dixon V remand proceeding and that we have already awarded

petitioners attorney's fees and expenses for Dixon III appellate

fees in our Dixon VII opinion .

Although petitioners in their response to respondent's

response . conceded that they should not receive an award for fees

we already awarded in Dixon VII, petitioners did not adjust their

requested award to reflect their concession . In their amended

request, petitioners changed only two of the entries that

respondent objects are'related to appellate fees .; namely the two

October 31, 2005, entries relating to Minns' and Williams '

services that petitioners changed from 30 hours to 30 minutes

each . Moreover, petitioners argue that the fees relating to th e

appeal of Dixon III that they are now requesting in the pending

request are related to the'cost of distributing to petitioner's

the award we granted in Dixon VII .

We agree with respondent . In Dixon VII we awarded fees for

Minns' services related to the appeal of Dixon III . Petitioners'

- 42 fina l opportunity-to apply for fees related to the-:appeal o f

DixonIlL'has passed . Therefore, we will reduce petitioners,'

award by 101 .39 hours, amounting to $26,285 .50- -to reflect the30

hours to ..30-minutes .corrections--a s well as $162 . 42 in expenses :

Minns

Williams

Paralegal,'

Secretary

Expenses

Tota l

Rat e

$35 0

Hours

53 .18

Amount "

$18',-613 ;.'0 0

17 5

10 0

38 .67

6, .767 .2 5

759 .0 0

7 .59

1 .95

101 .39

146 .2 5

"' -162 .4 2

26,(447 .9 2

Collection Bankruptcy, and Probate Matter s

Respondent also objects to petitioners' fee requests fo r

,services relating to petitioners' collection, bankruptcy, an d

probate . matters, citing 91 .76 hours of services, amounting to

$25,544-75, attributed as follows :

,.Minns

Williams

Paralegal

Total

Rat e

$ 35 0

17 5

10 0

---

Hours

54 .96

35 .05

1 .75

91 .76

Amoun t

$39,236 :00'

6,133 .7 5

175 .0' 0

2 .5 544 .7 5

Respondent'concedes that part of the 3 hours claimed b y

petitioners for a March 24, 2003,

entry for Minns's services i s

.allowable . The entry at issue states that Minns reviewed a

memorandum concerning Texas and Florida probate law, to whic h

respondent . objects, and that Minns conferred-with Binde r

concerning "remand issues" and the "Thompson settlement", which

respondent concedes is allowable . The entry at issue does not

allocate the time spent on each task, and respondent's objection

to this,entry does not provide a method of allocation . Left to

our own devices, we allocate 1 .5 hours to the review of the

memorandum on Texas and Florida probate law, which we disallow,

as indicated below . We also allocate 1 .5 hours to Minns'

conference with Binder on "remand issues" and the "Thompson

settlement", which we allow as compensable .

Respondent asserts that petitioners' collection, bankruptcy,

and probate matters are not related to the primary mandate of the

Court of Appeals and the Dixon V remand proceeding . Petitioners

urge us to award fees for these entries, claiming that, as

result of respondent's misconduct, various petitioners were

financially harmed so as to require the various enumerated

services .

We agree with respondent . Petitioners' difficulties in

collection, bankruptcy, and probate matters are not directly

related to the Dixon V remand proceeding . These fees were not

incurred at the trial level in the Tax Court but rather relate to

petitioners' personal financial and legal problems . We therefor e

reduce petitioners' requested award by 90 .26 hours of work,

amounting to $25,019 .75 in fees related to collection,

bankruptcy, and probate matters and to reflect the 1 .5 hours for

Minns' conference with Binder on "remand issues" and th e

"Thompson settlement", which respondent concedes is allowable :

Minns

Williams'

Paralegal

Total

Rate

$350

175

100

---

Hours

53 .46

35 .05

1 .75

90 .26

Amoun t

$18,711 .0 0

6 ,133 .7 5

175 .0 0

25,019 .75

- 44 -

Disciplinary Proceedings Against McWade and Sim s

Respondent objects to our awarding fees for Minns' effort s

in bringing disciplinary actions against McWade and Sims ,

amounting to 111 .28 hours of services and $30,396 . 75 in fees ,

attributed as follows :

Rate

Minns

Williams .

,Paralegal

Total

$350

175

100

---

Hours

76 .85

0 .75

33 .68

111 .28

Amoun t

$26,897' .5 0

131 .2 5

3,368 .0 0

30,396 .7 .5

In their, amended request, petitioners changed two of th e

entries that respondent objects to as related to Minns '

disciplinary actions against McWade and Sims ; namely two entries `

dated-February 6, 2009, which reduced the hours,claimed for

services by Minns from 12 hours to 2 hours and the hours claime d

for services by Minns' paralegal from 12 hours to 4 . .45 .

Respondent__argues that the attorney disciplinary proceeding s

were not adequately related to the Dixon V remand proceeding . We

agree with respondent . Disciplinary proceedings against McWade

and Sims are not related to our determination of the terms of th e

Thompson settlement . As Minns indicated in the Hongsermeier fe e

agreement, this was pro bono activity for which he did not expec t

to be compensated . We therefore reduce petitioners' fee request

by,93 .73 hours of services, amounting to $26,141 .75, to reflec t

the, amended'February 6, 2009, entries reducing the hours' claimed

- 45

for Minns' services from 12 hours to12 hours and the hours

claimed for Minns' paralegal from 12 hours to 4 .45 hours :

.Minns

Williams

Paralegal

Total

4 .

Hours

66 .85

0 .75

26 .13

93 .73

Rate

$350

175

100

---

Amoun t

$23,397 .5 0

131 :2 5

2,613 .0 0

26,141 .7 5

Freedom of Information Act Lawsui t

Petitioners' fee request also includes entries relating to a

Freedom of Information Act lawsuit that Minns brought to obtai n

IRS personnel records as part of an effort to determine the full

extent of IRS misconduct in connection with the Thompson .

settlement, amounting to 20 .88 hours of services and $5,263 i n

fees,

attributed as follows :

Minns

Williams

Paralegal

Total

Rate

Hours

Amoun t

$350

175

100

---

9 .55

10 .50

0 .83

20 .88

$3,342 .5 0

1,837 .5 0

83 .0 0

5,263 . .0 0

While the personnel records that .Minns sought may have been

of use in the disciplinary proceedings against McWade and Sims,

the records have no bearing on-our reconstruction of the terms

of the Thompson settlement, and are not sufficiently related-to

the Dixoin•V remand . proceeding . As a result, we reduce

petitioners' request by 20 :88 hours of services, amounting to

$5,263 .

5 .

Client Relation s

Respondent objects to entries that respondent refers to as

"client relations", which respondent asserts should be

46 disallowed ." These entries total 641 .67 hours ,

amounting to

$174,474 .50,-,,attributed as follows :

Minns .

Williams

Paralegal _

Secretary

Total'

Rate

$350

175

100

---

Hours

396 .38

159 .49

55 .72

30 .08

641 .67

Amount

$138,73 31, . 0 0

27,910 .7 5

5,572 .0 0

2 ;256 .0 0

174,471 .7 5

In their amended request, petitioners removed 16 entries

amounting to 36 .18 hours of Minns' services concerning items tha t

respondent argues should be disallowed because they concer n

"client relations ." After removal of the 36 .18 hours th e

remaining entries, total 605 .49 hours ,

amounting . to $161,809 .75 ,

attributed as follows :

Rate

Minns . .~,

Williams

Paralegal

Secretary

Total'

$350

175

100

---

Hours

360 .20

159 .49

55 .72

30 .08

605 .49

Amount

$12 .6,070 .0 0

27,910,75

5,572 .0- 0

.2,25 .6 .0 0

161,808 ..7 5

, .Of .the remaining entries, most relate to generalized, clien t

relations . Respondent's specific objections to,several entrie s

.related-'to, ;client ., relations lead us to conclude that- some o f

those-,entries should be (1) .completely disallowed--e : .g .,

communications with pro se petitioners ; (2) .fully allowed--e .g .(,

entries,-,relating to compensable calculations of clients' x,

deficiencies' ; or (3) partially allowed--i .e ., entries that are

only partially attributable to client relations . Nevertheless ,

we .•are satisfied that in addressing the entries :relating t

client relations . together we will arrive at an overall result

- 47 approximating the result=we would arrive at if we were to-address

the remaining entries by breaking them down into specific

subcategories :

Therefore we will address the remaining entries

as though they are all generalized client relations .

Petitioners argue that the remaining entries of

communications between counsel and various clients were directly

related to the Dixon V remand proceeding . We agree with

respondent's objection in part, but decline to disallow entries

related to-client relations in their entirety .

We may award fees for time spent on clientrelations`if that

time is sufficiently related to the matter entitling petitioner s

to a fee and expense award . Dixon VII ; Gridley II . Where

petitioners do not'provide the subject matter for client

communications ,

we may determine that a portion of those

communications is compensable . Dixon VII ; Gridley II . 'In Dixon

VII and Young , in applying section 7430, and in Gridley II, in

applying section 6673, we determined that if it was not clear

that a fee or expense entry describing client communications was

compensable ,

we would assume 50 percent of the time spent on the

communication is compensable .

In Dixon VII ,

we addressed the issue of-client relations

when we evaluated whether to award fees related to Binder's

and,

Irvine's client conferences .

Because we did not know the subject

matter of these conferences ,

we assumed that 50 percent of the

time spent in the conferences related to the appeal (the matter

- 48 for,whichwe were then awarding fees ) and the remaining 5,

.matters (client

0percntlado,ncmpesablurtd

relations'and"hand holding") . We then awarded fees .for.,the,

.remaining .portion of the time, which we allocated to .appeal,-s

related matters . ,

Young-=v Commissioner , T .C . Memo . 2006-189, we continue d

this approach in evaluating fee and expense entries that- did not ,

specify`the!,~subject matter of client communications . .

allocated 50 percent of those communications to the appeals,

grantingaanaward for that portion of the time, and .5 .0_percent to

unrelated,,noncompensable matters .

In,Gridley II, we applied the foregoing approach . establishe d

in'Dixon VIl,and . Young in .evaluating client relations entries,for

the .purposes~of,a request for fees and expenses under section

6673(a)-(2)(B) . Using this approach we reduced petitioners award

by 50 percent ; of requested fees and expenses relating .to client

communications where the subject matter of those communications . .

was, unclear .

Here,we,apply the approach used in Dixon VII,, Young , and

Gridley II in evaluating client relations entries ., We therefore

reduce„petitioners' award by 50 percent of the remaining client

relations entries, or 302 .75 hours, amounting to $80,905 .25,

attributable as follows :

49 Rate

$350

Minns

Williams

Paralegal

Secretary

Total

175

100

---

Hours

180 .10

79 .75

27 .86

15 .04

302 .75

Amoun t

$6 3 ,035 .0 0

13,956 .2 5

2,786 .0 0

1,128 . .0 0

80,905 .2 5

Motion for Reconsideratio n

Petitioners' original fee application included 39 .46 hours

of services related to the Hongsermeier test-case petitioners'

June 6, 2006, motion for reconsideration, for which petitioners

claim $ .11,448 .75 in fees, attributable as follows :

Minns

Williams

Paralegal

Total

Rate

Hours

Amoun t

$350

175

100

28 .07

6 .47

4 .92

39 .46

$9,824 .5 0

1,132 .2 5

492 .0 0

11,448 .7 5

In their amended request, petitioners removed a June 22,

2006, entry of 2- .92 hours of Minns' services for an item that

respondent objects is related to a motion for reconsideration of

this Court's Dixon VI opinion and therefore is not allowable in

this proceeding .

Respondent argues that because the June 6, 2006, motion for reconsideration was frivolous and that any related fees were not

reasonably incurred, we should disallow fees for services related

to the motion for reconsideration . Because some of the arguments

in the motion are being made by some test-case petitioners in the

pending appeals of Dixon VI and VIII, we do not characteriz e

these arguments as frivolous . However, we still agree that the

fee request for work on the motion for reconsideration should be

- 50 disallowe<

':Petitioners' motion for reconsideration was nothin g

more than-'a rehash of arguments in the briefs previouslyfiled by

Binder, Jones, and Sticht . We will reduce petitioners' .: award by

36 .54'-hours, amounting to $10,426 .75 in fees, to reflect the

removal in petitioners' amended request of the June 22, 2006 ,

entry for 2 .92 hours of Minns'

Rate

Minns

Williams

Paralegal

Total

services :

Hours

$350

175

100

---

25 .15

6 .47

4 .92

36 .54

Amount

$8,802 .5 0

1,132 .2 5

492 .0 0

10,426 .7 5

Entries Related to L .T . Brad t

Respondent objects to 35 hours of services, amounting t o

$10,780,'that-are related to Minns' and Williams,' communications

with,L .T . Bradt, attorney for Kersting . Those, hours are :,,,

attributableeas,follows :

Minns

Williams

Total

Rate

Hours

. .Amoun t

$350

175

26 .60

8 .40

35 .00

$9,31 0

=1,47 0

10,78 0

---

Respondent claims that any communications with Bradt wer e

not reasonably related to the proceeding on remand . We agree .

Bradt represented Kersting during the original trial of the tes t

cases, during the evidentiary hearing, and in Kersting's persona l

deficiency case, assigned docket No . 7448-96 . See Kersting

Commissioner , T .C . Memo . 1999-197 .

Petitioners did not respond to respondent's objections or

otherwise enlighten the Court as to the purpose or benefits to

- 51 petitioners of the consultations with Bradt, and we'disallow the m

in their entirety .

8 .

Entries Related to Joseph Nuna n

Respondent objects to 4 hours of entries, amounting to

$737 .50, for research related to former Commissioner of Internal

Revenue Joseph Nunan (Nunan) . Those hours are attributable as

follows :

Minns

Paralegal

Secretary

Total

Rate

$350

100

---

Hours '

1 .50

1 .00

1 .50

4 .00

Amoun t

$525.0 0

100 .0 0

112 .5 0

737 .5 0

We agree with respondent . The career of Nunan, who resigned

,in disgrace from the Bureau,-of Internal Revenue more than .40

years before the issuance of Dixon II, bears no relationship to

.the Dixon V remand proceeding . Accordingly,' we reduce

petitioners' award by 4 hours of services, amounting to'$737 .50 .

9. .

Chapin Billing Disput e

Respondent objects to 4 .38 hours .of entries related to a`

billing dispute between Minns and Jones . Those hours are

attributable as follows :

Minns

Williams

Total

Rate

$350

175

---

Hours

1 .98

2 .40

4 .38

Amount- $69. 3

42 0

1,11 3

Both Minns and Jones had filed entries of appearance for

petitioners Bryce H . and Reba E . Chapin (the Chapins) . On

October 30, 1992, Jones and O'Donnell filed a joint entry of

52 appearance for the Chapins . On May 17, 1994, O'Donnell :f:iled :a,

notice with the Court, designating Jones as counsel toreceive

service . On May 31, 1994, O'Donnell filed a motion towithdraw

from representation of the Chapins, which we granted on_June 2,

199 .4, .

. :Subsequently, on July 22, 2003, Minns and .Williams,filed an=

entry of appearance on behalf of the Chapins . Jones never filed

a motion to, .-Withdraw as counsel . However, on May 17, 2007, it

was'Minns who signed the Chapins' stipulated decision documents .

As of the date of this opinion, Jones remains the attorney o f

record : .for the Chapins .

The billing dispute between Minns and Jones is not-something

for which Minns could bill petitioners . Under Hensley v .

Eckerhart , 461 U .S . at 438, it would be inappropriate to award

fees,for :work related to a billing dispute . Even thoughthe

clients might have been willing to pay for such-services if they

really wanted .to replace their prior counsel, we do not ; believe

that respondent should be saddled with these fees . Accordingly,

we reduce petitioners' award by 4 .38 hours of services, amounting

to $1,113 in fees .

10 .

Closed Case s

Respondent also objects to 7 .14 hours of entries related to

motions to vacate stipulated decisions in cases settled before

and after the trial in Dixon II . Those hours are attributable as

follows :

-j5 .

Rate

Hours

Minns

Williams

Paralegal

$350'

175

100

2 .34 .

3 .67

1 .13

Total

---

7 .14

Amoun t

$819 .00 `

642 .2 5

113 .0 0

1,574 .2 5

We`agree with respondent as'to'5 .64 hours responden t

objected to on the grounds that those entries were related t o

closed cases which are the 'subject of our 'later opinions i n

Hartman I and II and are not . reasonably related to the Dixon V

remand proceeding . Early on in the Dixon V remand proceeding we

made it clear that the subject of reopening the closed case s

would not be addressed in-the Dixon"V remand proceedin g ."

Accordingly in regard to petitioners' fee request-,i n

relation to .closed'cases, we will reduce'petitioners= award by

5 .64 hours" amounting to $1,180 .501 in,,'fees which are attributabl e

as follows :

Minns

Williams

Paralegal

Total

Rate

Hours

Amoun t

$350

175

100

---

1 .59 .

2 .92

.1 .13

5 .64

$556,.5 0

511 .0 0

113 .0 0

1,180 .5 0

The remaining 1 .5 hours relate to entries . on February 14,

2005 ., which state that Minns'and Williams each spent

.75 hour to

"review motion to compel settlement as supplement to . motion for

leave .to file motion to vacate decision ." . . We .interpret thes e

entries . to relate to ..a ."Motion for Summary Judgment of a 10 0

percent Discount as,a Sanction" which was filed by Attorneys

- 54 Jones and O'Donnell on January 31, 2005 . However, in Gridley I I

we disallowed any award for services in preparing that motion .

See Gridley„-II, Part II .J . Likewise, in this case we disallow

fees iricurredmin reviewing that motion . Accordingly, we furthe r

reduce petitioners' award by 1 .5 hours amounting to $393 .75 ,

attributable as follows :

Minns

Williams

Total

11 .

Rate

Hours

$350

175

---

.75

1 .50

Amoun t

$262 .5 0

131 :2 5

393 .7 5

Overhead Expense s

Respondent has identified several fee entries related to

overhead expenses . These entries total 9 .59 hours19 of the,

secretary;'s services, amounting to $719 .25 in fees and $122 for

"overtime~air conditioning" on January 5, 2003 . Generally., ,

190f,,respondent's objection to administrative secretarial

services, 7 .32`hours of the 9 .59 hours of entries respondent

objects to are not included among respondent's other objections .

The 1 .5`hour entry dated Feb . 21, 2003, is included in

respondent's . objections to entries related to JosephNunan,

discussed supra part III .B .8 . The .77-hour entry dated°Feb . 21,

2003, is - included in respondent's objections to excessive time

spent, on the-'May 30, 2003, status report, discussed' infra °part

III .D .

Furthermore, petitioners' amended fee and expense requestincludes 49 .98 hours of entries related to the secretary's

services . Respondent has objected to 34 .3 hours of these entries

for reasons other than their being an overhead expense . Because

respondent'has"expressly objected to only 41 .62 hours of the''

secretary's services, we assume that respondent did not intend to

.o'the remaining 8 .36 hours of the secretary's services- .,

object't

As a result, we have only included 7 .32 of the 49 .98 hours in our

calculation' of the total number of hours to which 'respondent°

objects .

- 55 overhead expenses,, such as, routine administrative tasks,' are not .

properly billable to clients and . thus • cannoe`,be billed •to` ,

respondent .

Hensley v . Eckerhart ,

supra at 434 ;

Young v .

Commissioner , T .C . Memo . 2006-189 :

Secretary's Service s

Some of .the services the secretary provided are similar to

those of=a paralegal . For example, one of the secretary's tim e

entries, dated`August 5 2003,-states : "Preparation"of all

attorney responses to 7/11/03 Court order ." Another entry, dated

February-18,,-2004, states : ",Preparation of pleadings[ .]

Preparation of response to Court's Feb . 4 order for-filing ."

These-types ofservices'are'directly related to the Dixon V remandproceeding and`are compensable .

The secretary's services to which respondent objects are asfollows : (1) 1 .5 hours on'February 21,,2003, for "`Draft letter t o

NY Bar association regarding Nunan'finalized and send out alon g

with letter to clients re[ :]• same"- ; (2)' .77 hour on May 29, 2003,

described `as "File Prepare'-for filing and send lout'' status report" ;

(3) 1 hour on August 25, 2003, described as "Preparation of travel

plans for .September 5 status-conference" ; (4) 2 .02 hours on August

11,

2004'; described as .!"Preparation for travel plans for Minns and

Williams, send itinerary to clients attending hearing" ; (5) 2 .93

hours on September 11, 2004,-described-as "Preparation for tria l

strategy meeting," ; '(6)` .52 hour on May 16, 2007, described as

"File-Draft -[sic] cover letter and .file Hbngsermeier notice of

- 56 appearance . :with Tax Court" ; and (7)

.85 hour on May 18,~ .~2007,,

described as "Preparation of government [sic] status report . for ,

distribution and distribute" .

.,In Young we explained : "As any billing attorney can attest,

these are the types of attorney time charges that, however

necessary-the underlying activity, are difficult to justify on a

,client invoice ." Because these are not activities for which Minns

could bill ` his . clients, we will not award them to petitioners

However,-because we disallowed the entry dated February 21,,2003 ,

in our, section dealing with Minns' 1 .5 hours of researc h

concerning, :;Nunan, we will not reduce petitioners' awardtwice for

.that-entry: . Accordingly, we reduce petitioners'erequested awardby 8 .09 hours of the administrative secretarial services,,,

amounting to°$606 .75 in fees .

•b .

Overtime Air Conditionin g

Unlike theentries pertaining to the secretary',s services,

air conditioning is an overhead expense . We therefore-reduce ,

gpetitioners'arequested expense award by the $122 in expenses . .,,,

.pertaining, .to overtime air conditioning .

12 .

Inadequately Described Entrie s

c ..r Respondent also claims that 16 .16 hours of the requested

fees and $11,90 .41.03 in expenses in petitioners', .current

application are not adequately described so that .we can .. determine

whether-those .entries are related to the proceeding on remand . ;,Of

the~.16 .16 hours, 9 .32 are attributable to Minns and 6 .84Fare

- 57 attributable to Williams .--However-in-their amended-fee request

petitioners deleted 283 hours of Minns'd services'on June 5,

2003 .

With regard to the remaining 13 .33 hours (16 .16 minus 2 .8 3

equals 13 .33), we agree with respondent that those entries are too

vague to enable us to determine whether they are reasonabl y

related to the Dixon V remand proceeding . For example, one entry

dated November 29, 2004, claims that Minns ..spent .1 .82,hours

"review[ing] Tax Court orders'and pleadings" . Because we cannot

determine whether these-Tax Court orders were related to the Cour t

f Appeals for th

.e ;iNinth .Circuit's primary mandate,or-anothe r

;matter entirely, we cannot determine whether theal .82,hours,are

reasonably : related to the proceeding on remand .

We'also agree with respondent that the expenses

totaling

$11,904 .03 are inadequately-described . The entries refer to $600

for "pilot group meetings", $1,200 in long distance charges .between 2003 and 2006, $10,004 .03 for copying and . mailing

expenses, and $100 for a "small group lunch" .

We cannot determine the content orwsubject matter of the

pilot group meetings, long distance phone calls=, copied . and mailed

document-s, ;or "small group lunch" . We will therefore follow the

same approach as discussed in our ."Client Relations" section ,

supra , and reduce the award for these expenses by,-50 percent .

- 58 Therefore, ; w e reduce petitioners' requested award by 13, .33x, hours,

amounting, to $3,468 .50 in fees, as well as $5,952 .02 in expenses ,

allocable as follows :

Rat e

Will iams

$350

175

Expenses

'Minns

13 .33

Total

' .13 .

6 .4 9

6 .8 4

$2 ;271'.50

1,197 .0 0

5,952 .02

9,420 .5 2

Miscellaneou s

°Respondent-also objects to 31 .77 hours of entries'fo r

miscellaneous- reasons . Of these, 21 .74 are attributable to'"Minns ,

5 .08~are attributable to Williams, and 4 .95 are attributable-`t

the paralegal, as follows :

Minns

Williams

Paralegal

``Total

Rate

Hours

Amoun t

$350

175

100

---

21 .74

5 .08

4 .95

31 .77

$7,60 9

88 9

49 5

8,993 .0 0

We"'will address in turn respondent's miscellaneous objections

to entries relating to the services of Minns, Williams, and th e

paralegal .

Minns' Service s

The 21 .74 hours attributable

to Minns' services area s

follows : hours on April 30, 2003, 5 .83 hours on April 30, 2003,

.5 hour on May 8, 2003, 1 hour on June 30, 2003, 1 hour on`Januar y

5, 2004,'' .83 hour on January 21, 2004, 2 hours on September 28 ,

2004

.5 hour on December 30, 2004,

.5 hour on February 4, 2005,

59 '1-hour on February 25, 2005,' .25 hour on February 28, 2005, 3 .97

.hours on May 8, 2005, 1 .08 hours on May 10, 2005,'l hour on May

18,

2006,

and

.28 hour on May, .15, 2007 .

The entry dated April 30 ;,2003, claims that Minns-spent 2

hours that day discussing petitioners'' tax liability with Snell

(the accountant) . =Respondent argues that these hours are'n .o t

isuffic'iently related to the proceeding on remand .- We•disagree ;

calculatingpetitioners',tax liabilities was essential to*the

.remand proceeding . Moreover, Snell's participation in the reman d

proceeding was so extensive that it resulted in Snell replacing

Minns at the counsel-table during the-Las Vegas trial session .

Thus, we make no adjustments-to petitioners'--award for this entry .

= The entry dated"April 30, 2003, `claims' that" Minns spe n't' 5 .83

hours that day researching-tax shelters . Respondent claims that

.this research is not sufficiently related to the proceeding

following the Court of Appeals for the Ninth Circuit's primary

mandate in Dixon V .- We agree with respondent and reduce

petitioners' award-by-5 .83 hours'of Minns' services related`to=,

researching tax shelters .

The entry dated May B, 2,003,

claims'-that Minns ' spent t . S hour

that day discussing a'status report-with Binder . "Respondent

objects that Porter & Hedges' timesheets-indicate-that the`

discussion lasted only

.3 hour . We think that a

.2-hour time

difference is reasonable and decline to reduce-petitioners' awar d

relating thereto .

- 60 The entry dated June 30, 2003, claims that Minns spent 1hour

that, day ina„telephone conference with Binder . Respondent argues

that the timesheets of Porter & Hedges reflect that the .conference

lasted•,no more than .5 hour . We agree with respondent=and reduce

the amount awarded for this entry by

.5 hour .

-The .entry dated January 5, 2004, claims that Minns spent=l,

hour reviewing the Tax Court Rules and speaking,to Wolfe .Schroeter

(Schroeter),=an attorney listed as practicing family law in=Texas .

Respondent argues that this entry is not sufficiently related t o

the,proceeding on remand . We agree .

.Petitioners have not shown that Minns' review of the,Tax

Court Rules and : consultation with Schroeter were reasonably

related to the Dixon V remand proceeding . Moreover, petitioner s

have not .,responded to respondent's contention that Schroeter does

not practice tax law . Without elaboration, we cannot determine

what,', connection--if any--Minns' conversation with Schroeter, ;.ha s

with ascertaining the terms of the Thompson settlement .

therefore-reduce petitioners' award for this entry . by 1 hour of

Minns's services .

The ; entry dated January 21, 2004, claims that Minns spent

.83

hour reviewing=a letter from Binder and calling Binder .`

Respondent objects that this conflicts with the Porter & Hedges

timesheets,,=which indicate Minns and Binder's telephon e

conversation lasted .5 hour Even if the telephone conversatio n

lasted only

.5 hour, we do not think it is unreasonable for .

- 61 petitioners .to request an award for- . .83 hour for-this entry .- If .

we take into-account that Minns not,only spoke to Binder but als o

reviewed'Binder's letter,- it is reasonable that Minns'•--timesheetreflects a longer period than .does .Porter &'Hedges' . Therefore ;

we allow this entry-in its entiret y

The entry 'on Sep t ember 28,'2004,,-claims that-Minns spent 2T

hours reviewing a'-letter from Binder, written'to IRS Chief Counsel

B . John Williams (B'.J Williams) . Respondent objects that 'there

is no record of ,a letter from'Binder to B .J :--Williams-reflected in

Binder's timesheets• . We disagree with respondent .

On January 25, 2005, Binder recorded that he drafted and

revised a'-letter to B .J .

Williams and sent a copy of the letter-to

all counsel of record-for review . There is-a-discrepancy between

Binder's and Minns' entries as to when the proposed letter to B .J .

Williams was written, which, as previously mentioned, is not the

first time Minns' entries have been . inconsistent with-Binder's .

However, we-are 'satisfied, notwithstanding respondent's objection,

that'Minns spent 2 hours reviewing Binder's draft letter . We note

in passing that respondent did not object to the time that Binder

'spent in preparing theletter-and that"possibly the letter was

never sent . We-will not reduce petitioners, fee award for this

entry .

The'entry dated December 2004, claims that Minns spent'-- .5/hour reviewing a stipulation to take the deposition of Peter D .

Bakutes (Bakutes), Deputy Regional Counsel for Tax Litigation for

- 62 the Western Region in San Francisco . Respondent argues ._that

Bakutes' testimony had already been taken on December,7,,2004 .

However, contrary to respondent's objection, the stipulation tot

take ;Bakutes' testimony on December 7, 2004, was filed with-the ,

Court'on December 8, 2004 . Nonetheless we will not award any fee s

forrMinns' . .review of the stipulation to take .Bakutes' testimony .

The document contained less than one full page of text .

Additionally, it was of little importance on December 8,

.2004,

=because-Bakutes' testimony had already been taken . Therefore ,

Minns should have expended no more than a de minimis,amount o f

time reviewing, the stipulation to take Bakutes' testimony . ,

Accordingly, we will reduce petitioners' requested award by, :5

hour :-of Minns', . services, amounting to $175 in fees .

_The entry dated February 4, 2005, claims that Minns spent . .5

hour that . day reviewing petitioners' second motion for a hearing,

which-Binder•fi .led on February 3, 2005 . Because the second motion

for a hearing was related to the Dixon V remand proceeding ; and the

:hearing was later held in Washington, D .C ., we allow this entry in

its entirety. ;

The entry dated February 25, 2005, claims that Minns spent 1

hour . thatdayreviewing an order issued on February 22, 2005 .

Respondent . argues correctly that no order was issued on February

22-,2005, .- We thus reduce petitioners' award by 1 hour, .amounting

to $350-in fees .

- 63 The entry dated February - 28 , 2005,`- claims - that `•Minns spent

.25 hour reviewing an°order ' issued February --' 24,2005 . Respondent

objects that we-did not issue an order on February 24 ;-2005 :

agree with respondent and reduce petitioners' award 'by

.25 hours

of Minns' services, amounting-to $87 .50 in Efees .

' :The entry'dated May 8,'2005', . claims that Minns spent 3 .97

hours that day reviewing Binder's draft supplement to petitioners'

motion to allocate the burden of proof, .which petitioners,,claim

was filed on September 9, 2004 . Respondent argues that-no

supplement' to the motion to--allocate the burden of proof was ever

filed . We agree with respondent, and we need not award fees fo r

hours wasted through inefficiency .= See Hensley v .-Eckerhart -,•46 1

U .S . at-436-437 ;, Young v . Commissioner ,'T .C . Memo . 2006-189 .Therefore, we will'reduce petitioners' requested award by'3 .97

hours of Minns' services, amounting-`to $1,389 .50 in fees, relate d

to this entry .

The entry dated-May 10, 2005 ; :claim6,that Minns spent 1 .08

hours on phone calls with Binder and a'client conference :

Respondent objects .that Porter & Hedges' timesheets donot reflect

that Minns and Binder spoke-on that date .- We'agree"with, .

respondent that petitioners should not receive an award for -tim e

attributable to a conference with'Binder that-never'`happened .

Accordingly, we-will reduce the amount,awarded to petitioners by

50-percent .

64 ,We also . note that the remaining portion of the entry i s

attributable to nonspecific client communications . For the

reasons . discussed in our "Client Relations "

section ,

supr

have - determined that we will award only 50 percent of th e

requested award for entries pertaining to client communications

that'do not specify the subject matter of those communications .

We_reduce` petitioners '

award pertaining to the entry dated May,

10 ;,2005 . .by,75, percent or

. 81 hour of Minns' services ,

amountin g

to $283 . .50rin fees .

The entry dated May 18, 2006, claims that Minns spent,l hour

in-conference-with a client and in a telephone conference with all

counsel . Respondent objects, arguing that the Porter & Hedge s

timesheets,indicate that the conference lasted only

.5 hour.;. W e

agree with respondent that the conference was only

.5 hour .

However,,the~entry indicates that Minns also held a conferenc e

with a client . By inference, the remaining

.5 hour of the May 18,

2006, entry-i-s attributable to that client conference . Because we

have determined that we will award only 50 percent of nonspecifi c

,client relations entries, we reduce the award for this entry by

.25 hour,, which is 50 percent of the

.5 hour attributable to a

client, conference, amounting to $87 .50 in fees .

The entry dated May 15, 2005, states that Minns spent

.2 :8

hour that .day .composing an email to Snell regarding stipulated

decisions in the Chapin and Meyner cases . Respondent argues-that

these stipulated decisions are not sufficiently related to the

proceeding on remand . We agree and reduce petitioners' requested

award by' .28-hour . Therefore, after reviewing respondent's

miscellaneous objections to Minns' fee entries, we have reduced

petitioners '

requested award by 14 . 39 hours of Minns', services,-

totaling $5,036 .'50 injfees .

Williams' Service s

The 4 .33 hours of Williams '

comprise :

2004,

services respondent objects to

.5 hour on - January ` 5,~ 2004,' 2 hours • on September 28,

.5 hour on February 4, 2005 ;

. 25 hour - on February 28, 2005,

and 1 .08 hours oh'May13, 2005 :

The entry dated ' January ' 5,/. 2004 ,

states that-,Williams spent .-

. 5 hour reviewing Tax Court Rules and speaking with Schroeter- .

;Respondent objects that these activities . .' are - not sufficiently

related to the proceeding on remand .

We agree with respondent for

-the same reasons as those'in our discussion of a nearly identical

entry referring to Minns' services . - See supra .,,part - III .B .13 .a .We .reduce petitioners ' requested award by

.5 hour of - Williams'

services ,, amounting to $87 .50 in fees .

The entry dated September-28,o2004, states that_Williams F ,~

.spent 2 hours - reviewing a

Williams .

"memo" Binder had written .to'B .J

For the "reasons ' provided in our discussion of a nearly

identical entry -related to Minns' review of .:the proposed letter to

B .J . Williams, we decline to make any - adjustments to petitioners'

award for this entry .

See supra part III .B .13 .a .

- 66 .The-entry.dated February 4, 2005, states that Williams spent

.5 hour reviewing petitioners' second motion for a hearing, which

Binder-filed on ,February 3,,2005 . Respondent argues that=:,this i s

not sufficiently related to the proceeding on remand .

disagree . This motion resulted in our ordering the final hearing

session in Washington, D .C . We will not reduce petitioners'

requested award for this entry .

.The entry dated February 28, 2005, states that Williams spen t

.25 hour reviewing an order we issued on February 24,

2005 .

Respondent argues correctly that no order was issued on February

24, 2005 . ,Accordingly, we reduce petitioners' requested award by

.25 hour- .of Williams' services .

The- ;entry dated May 13, 2005, states that Williams spent 1 .08

hours .-in a-conference with a client, followed by ,a conference wit h

Minns-,and Binder . Respondent objects that the Porter &,Hedges

timesheets`do not reflect a teleconference on that date . We agree

with respondent .- For the same reasons as those in our discussio n

of respondent's objection to a nearly identical entry related t

Minns' :,.services, see supra part III .B .13 .a, we reduce .petitioners'

award by ~ .81ahour, 75 percent of the value of this entry.

After reviewing respondent's miscellaneous .objections-to

.Williams'-.services, we reduce petitioners' requested award by a

total .of 1 .56 hours of Williams' services, amounting•to $273 in

fees .

_ 67 _

Paralegal Service s

Respondent raises several miscellaneous objections to 4 .95'. .

hours of paralegal services . Those"4 .95 hours comprise--the

following entries :5 hour on'February"18, 2003, 1 AS hours .onl- .

February 19, 2003, and 3-hours on October'23, 2003 .

The entry"dated,,•February-18, 2003 ; ..-states that the paralegal

spent

.5 hour preparing a letter'tof-be sent to :B .J . Williams.

Respondent argues that the letter'to B .J . Williams was no

. We disagree-for

tsuficenlyratdohepcingoremad

the reasons stated in our earlier discussion of a"similar entry

pertaining`to Minns'" services . See supra p art III .B .13 .a .

Therefore we-will=not deduct any portion of this time entry from

.petitioners" requested' award .

The entry dated February 19 ., 2003, states that Minns '

paralegal spent-1 .45 hours preparing contracts'to'send to the new

pilot group . Respondent objects that these are engagemen t

agreements and not part of the Dixon V remand proceeding . We

agree with respondent ; engagement agreements are not sufficiently

related to the Dixon V remand proceeding'to merit our awardin g

fees -for preparing them . We"adjust .petitioners' requested award .

:'downward by 1 .45 hours of-paralegal, services, amounting to $145 .

.The entry .dated October 23, 2003, states that Minns '

paralegal spent 3 hours preparing a status report . Responden t

objects . that Binder, not Minns, prepared the status report and

that 3 hours is excessive for preparing an eight-page status

68 report . We agree with respondent ; 3 hours is excessive for

reviewing an .eight-page status report. We think that l .hour is a

reasonable , amount of time to have spent reviewing an eight-page

status,report . We reduce petitioners' requested award by 2 hours

of the paralegal's services, amounting to $200 in fees .

Therefore ;, after considering respondent's objections to

miscellaneous fee entries related to the paralegal' s services,-we

reduce petitioners' requested award by an additional . 3 .45 hours i n

paralegal time, amounting to $345 in fees .

°d .

Tota l

Accordingly, we deduct a total of 19 .40 hours of, entries

corresponding to respondent's miscellaneous objections, amounting

to $5,654 .50 in fees . Of these hours, 14 .64 are attributable to

Minns' services, 1 .56 are attributable to Williams' services, an d

3 .45 are, attributable to Minns' paralegal's services .

Minns

Williams'``

Paralegal

Total

14 .

Rate

Hours

Amoun t

$350

175

100

---

14 .39

1 .56

3 .45

19 .40

$5,036 .5 0

273 .0 0

345 .0 0

5,654 .5 0

Total Reductions for Entries Not Reasonably Related

to Dixon V Remand Proceedin g

After-,examining the entries that respondent objects to as not

reasonably,related to the Dixon V remand proceeding, we have

reduced petitioners' requested award by 736 .89 hours of services ,

amounting to`$191,976 .50 in fees and $6,236 .44 in expenses .

69°Therefore, `after oiir reductions in response to respondent's

objections, petitioners would be left with an award of $484,038 .75

in fees (tabulated below) and $15,289 .55 in expenses .

Hourly

Hours

Minns

Williams

ParalegalSecretary

Total

Requested

Disallowed"

1,533 .29-

441 .59

738 .27

194 .06

124 .18

49 .98

2,445 .72 -

74 .66

26 .58

728 .47

Remaining .

t-1,091 .70

544 .21

49 .52

23 .40

'1 ;717 .25

" Rate Awar d

$350

175

100

- $382,095 .0 0

95,236 .7 5

4,952, .0 0

1,755 .0 0

$484,038 :7 5

Reliability of Documentatio n

Respondent has asserted-and .Minns,does .not deny .that the

Minns Law-Office did not maintain-comtemporaneous,timesheets .

This is the primary reason that respondent rejected-Minns' .belated

efforts to reach an agreementlon fees and expenses . Respondent

was able to reach-agreement on thi,s .subjectywith Irvine-and Stich t

because they had maintained the necessary records and had started

presenting them to respondent many months before we ordered all

petitioners in the Dixon V remand proceeding to file their fee an d

expense requests with the Court . It is our understanding that th e

Minns Law Office created the entries to support the Minns reques t

by using the Porter & Hedges entries as a starting point .

We are left with the definite impression that - the 'use of thi s

method by the Minns Law Office has resulted in the"claim of a

total number of hours that approaches the number of hours that

respondent agreed amounted to a reasonable expenditure'of time b y

Porter & Hedges, which by informal agreement with all counsel,

- 70 took the-Jeading ;role on behalf of petitioners in the,Dixon ;V

remand,proceeding .,2 0

After having addressed respondent's specific objections .to;

the reasonable relationship of various tasks undertaken by th e

Minns,-,Law Office to the Dixon V remand proceeding, we are lef t

withz,;a,lack of .confidence in the accuracy of the figures for the

remaining hours .. In Dixon IV we imposed one-third across ,-.theboard reductions to petitioners'

fee requests because, o f

inadequate substantiation by their counsel .

Duplicative and Excessive Effort s

We nowaddress respondent's objections that the number of,

,hours,,of!services petitioners request is excessive and includes ,

duplicative .efforts . Respondent specifically points to. : ., 83 .07

-hours,'amounting to $25,609 .50 in fees ,21 related to preparing the

May~e30, 2003 ; .status report ; 211 .09 hours, amounting to $49 .,288 . .2 5

We have nevertheless dealt with respondent's specifi c

objections to time spent on various tasks by assuming the

accuracy and correctness of the amounts of time claimed for the

purpose of .removing them from the total .

2 1Respondent',s objections to entries related to Minns and

his staff's preparation of the May 30, 2003, status report are

attributable as follows :

Minns

,Williams

Secretary

Total

Rate

Hours

Amoun t

$350

63 .71

18 .59

0 .77

83 .07

$22,298 .5 0

3,253 .2 5

57 .7 5

25 ;, 609 .50 :4.

175

---

71 in fees," related to preparation for-hearings and depositions ;

88 .37 hours of other miscellaneous entries, amounting to $26,222in fees ; 23,and $ 4,135 .96 in travel expenses related to the

hearings . '' However, because we-find that Minns !

efforts as . a whole

are excessive ,, we decline to reduce petitioners '

award'on ."the

basis of respondent ' s individual objections to excessive time and

fees .

Instead, we ' will apply'an .across - the-board reduction of

one-third to petitioners '

remaining award .

Excessive Fees and Expense s

We agree with' respondent ' s assertions that many of the

entries in- petitioners '

fee requestare'excessive .-,Minns,, ha s

claimed excessive,hours .and expenses for preparing the May 30 ,

;2003, status report, preparing for hearings, travel, and in

general . In comparison to the-other firms, Minns and his staf f

22Respondent's/objections to entries . related to Minns and

,his staff's preparation for hearings and depositions'are

attributable as follows : . .

Minns

Williams

Paralegal

Total

Rate

Hours

Amoun t

$350

175

100 .

71 .20

138 .39

1 .50

211 .09

$24,920 .0 0

24,218 .2 5

150 . .0 0

49,288 .2 5

23Respondent's objections that other, . miscellaneous entries

are excessive are attributable as follows :

Minns Williams

Total

Rate

Hours

Amoun t

$350 175

---

61 .47

26- .90

88 .37

$21,514 .5 0

4,707 .5 0

26,222 .00

- 72 spent, approximately twice the time preparing the status report

they filed 2 4

Moreover, the Minns Law Office's participation in the°hearing

sessions,~,and ;depositions was minimal . Minns attended only the,

first day,ofboth the August 18-19, 2003, Houston status

conference and the September 20-22, 2004, hearing session .

Additionally, . although Williams attended the status conferences

and the hearing sessions, she did not actively participate - in . the

proceedings . However, despite our agreement with respondent tha t

M24Minns .and his associates claim to have spent 79 .5 hours

drafting the status report on behalf of the Hongsermeiers . The

report Minns-filed contained approximately three pages of singlespaced text .

Binder and Irvine spent approximately 67 .35 hours preparing

the`status .report filed on behalf of the Dixons and the

Dufresnes . The body of the status report prepared by Porter &

Hedges' . attorneys contained approximately 10 pages of doublespaced text .

Sticht's time sheets indicate that he and his associates

spent approximately 30 2 hours preparing the status report filed

on behalf of certain non-test-case petitioners . Sticht's-report

contained approximately three pages of double-spaced text and was

submitted with several attached exhibits . Approximately three

pages-of--the'attached exhibits were Sticht's own work, prepared

for the 'status report .

Izen's timesheets indicate that he and his associates spent

approximately 31 .58 hours between preparing the status report

Izen filed on behalf of the Youngs and the Owenses . The report

Izen : .filed contained approximately five pages of double-spaced

text .

Jones'"timesheets indicate that he and his associates spent

8, .96-hours preparing the status report and the report contained

approximately three pages of double-spaced text .

73 these hours and'expenses'are excessive, we make no reductions to

petitioners' award on the separate bases of respondent's

objections .

2 .

Reduction-for Duplicative and Excessive Effort s

We do not find that this .inflation of hours is limited to the

entries respondent objects to .as excessive . The hours and

expenses ' in' Minns''timesheets•are generally excessive"and`are

duplicative of the services provided by Binder . We will therefore

apply a general reduction of'one-third to the fees for-the time

remaining after we'addressed respondent's specific objections .

Because the attorneys at Porter & Hedges performed the bulk

of the work during the remand period,' we find that it would-be

unreasonable and a duplication of effort for the other firms

participating in the remand proceeding to bill as many hours .

As note 15 supra shows, Minns and Izen both claimed more than

2,000 hours, on the'same or'der`of magnitude as the time claimed by

the Porter & Hedges' attorneys, whereas-Sticht and Jones-claimed,

more than 1,000 fewer hours than the time claimed by Minns an d

Izen .

We find and-hold that it would be unreasonable and an

exercise'of poor billing judgment for Minns to bill almost as many

hours as the Porter & Hedges attorneys . It is in the light\of

this observation, coupled with .the lack of contemporaneous

documentation for the Minns fee and expense request, that we

74 reduce byone-third Minns' overall fee award for the remaining .

time claimed .

Conclusion

To calculate the award, we first reduce Minns' and Williams' .

.claimed hourly rates . We then reduce the hours petitioners hav e

requested for Minns, Williams, the paralegal, and the .secretary by

our downward . adjustments for fees not sufficiently related to the

DixonV ;remand=proceeding which would leave petitioners a fee

award of,$484,038 .75 . Then, we reduce the remainder by one-third

(33-1/3 .percent) of the remaining fee amount, amounting to

$161,346 .25,, to reflect "overlawyering" and lack of

contemporaneous documentation .

After completing these calculations, we find that petitioners

are entitled to an award of $322,692 .50 in fees and $15,289 .55 in

expenses .

Giving effect to our concluding determinations in Dixon IX

and GridleyIl, we shall invoke our inherent power to require

respondent to pay to petitioners additional amounts equal to

interest at the applicable rates for underpayments under sections

6601(a) and 6621(a)(2) on $322,692 .50 and $15,289 .55 from

September-17, 2007, when petitioners filed their motion to amend

75 'their original request for attorney 's fees relating to the Dixon V

remand proceeding .2 5

We will address the manner in which the awards are to be

administered in .a separate order or orders implementing thi s

opinion .

To give effect to the foregoing ,

An appropriate order or orders .

will be issued .

25We provide for accrual of amounts equal to interest from

the later date petitioners amended their original request for

attorney ' s .fees because their original request contained numerous

errors that remained uncorrected until they .filed their amended

request .

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.