# T .C . Memo . 2009-27 3

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

01

T .C . Memo . 2009-27 3

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

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CONTENTS
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I . Kersting Tax Litigation Through Dixon V Remand
II . Dixon V Remand Proceeding

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A . Houston , Status Conference

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B . Los Angeles Status Conference and Thompso n
Tax Records for Years Other Than 1979, 1980 ,
and 1981

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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 .

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.Bankruptcy

Against .McWade and
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6 ., Motion for Reconsideration .

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8 . Entries Related to Joseph Nunan .

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5 . Client Relations

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7 . Entries Related to L . T . Bradt

9 . Chapin Billing Dispute

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b . Overtime Air Conditioning

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11 . Overhead Expenses

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a . Secretary's Services

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10 . Closed Cases

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12 . Inadequately Described Entries
13 . Miscellaneous

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a . Minns' Services
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b . Williams' Services
c . Paralegal Services
d . Total

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14 . Total Reductions for Entries Not Reasonabl y
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Related to Dixon,V Remand Proceeding

C . Reliability of Documentation .
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Duplicative and Excessive Efforts
1 . Excessive Fees and Expenses

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2 . Reduction for Duplicative and Excessiv e
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Efforts
Conclusion

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73

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 .

S

- 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

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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 )
I.

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

I

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 .
A.

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 )

I

- 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 .
C.

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,
i

_

counsel's table .,

x

'

to take Minns' seat at petitioners .' ,
is

4

n

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

t

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
F

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 .
E.

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
e
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

f

On July ;l4 2005 Sticht filed a nine .-page supplemental ~$`100 per hour for the paralegal's services, and,$ .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 .
A.

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

1

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 .

B.

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
75

$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) .
A.

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 .
17

~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
75

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
75

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

43

-

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

a

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

i

- 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
75
---

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
75
---

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 ,

1

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
6.

175

100
75
---

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
75
---

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 .
1,
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
.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 .

L

- 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 .

I

- 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, .
Ii
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

65
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 .

C

_ 67 _
c.

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
C.

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
75

- $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 .
D,

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

75
---

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 '
1.

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 .

I

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Ae247c3464d95b9c1. Public record. Not legal advice.