# Opposition Brief — Ballard v. Commissioner

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2005
- **Citation:** 544 U.S. 40

## Text

[Supreme Gout 0 S—

~ FILED

OCT 6 ~ 2003
No. 03-184 LOFFICE OF mE CLERK |

Jn the Supreme Court of the Gnited States

CLAUDE M. BALLARD AND MARY B. BALLARD,
PETITIONERS

Vv.

COMMISSIONER OF INTERNAL REVENUE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

THEODORE B. OLSON
Solicitor General
Counsel of Record
EILEEN J. O'CONNOR
Assistant Attorney General
KENNETH L. GREENE
STEVEN W. PARKS
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTIONS PRESENTED

When a case is assigned to a Special Trial Judge of
the Tax Court, the Special Trial Judge is to make a
“report, including findings of fact and opinion, to the
Chief Judge, and the Chief Judge will [then] assign the
case to a Judge or Division of the Court.” Tax Ct. R.
183(b). The Judge to whom the case is thus assigned
“may adopt the Special Trial Judge’s report or may
modify it or may reject it in whole or in part * * * .”
Tax Ct. R. 183(c). The questions presented in this case
are:

1. Whether the Due Process Clause requires that
the “original” report of the Special Trial Judge be dis-
closed to the parties.

2. Whether 26 U.S.C. 7482(a), which authorizes ap-
pellate review of Tax Court decisions, requires that the
“original” report of the Special Trial Judge be disclosed
to the parties.

(I)

Cases:

TABLE OF CONTENTS

SEES EEE EERE EEE EEE EEE EERE EEE EEE ET EE EEE ESET ESTEE EEE EEE ESSE EES R SEES RESO ROBE EES

elaieeei tit tieeeehhhhhhhthhhhteLLELLLELLLLLLLLLLELLETet

SEER EEE E EEE EEE EE EEE EEE TEETER EEE EEE EEE EERE EEEEEEE SEER SEES EERE E SESE E SEER EEE R ESOS

TABLE OF AUTHORITIES

Bakelite Corp, Ex parte, 279 U.S. 458 (1929) ..cccccccccccccoooes
Ballard, In re, No. 00-14762-H (11ta Cir. Oct. 23,

2000)

FOERSTER EEE EEE EEE EEE FEET EERE HESS REESE EEE EEE EEO R EEE ES

C. Blake McDowell, Inc. v. Commissioner, 67 T.C.
ee
Checkosky v. SEC, 23 F.3d 452 (D.C. Cir. 1994) ..............
Colorado v. New Mexico, 467 U.S. 310 (1984) ..................
Cook, In re, 49 F.3d 263 (7th Cir. 1995) .....cccccccccccscceceeceeenen

Crowell

V. Benson, 285 U.S. 22 (1982) ..ccccccccccccccccecececeeeees

Estate of Varian v. Commissioner, 396 F 2d 753

(9th Cir.), cert. denied, 393 U.S. 962 (1968) ......cccccceoe.
Estate of Robert W. Lisle, In re, No. 00-60637

NO
Fayerweather v. Ritch, 195 U.S. 276 (1904) en
Freytag v. Commissioner.

904 F 2d 1011 (5th Cir. 1990), aff'd, 501 U.S. 868

(1991)

501 U.S. 868 (1991) aa
Goetz v. Corsson, 41 F.3d 800 (2d Cir. 1994), cert.

denied, 516 U.S. 821 (1995) ..

Halle v. Commissioner, 175 F.2d 500 (24 Cir.

1949),

cert. denied, 338 U.S. 949 (1950)

Heim v. Commissioner, 251 F 2d 44 (8th Cir.

1958)

(IIT)

10

IV

Cases—Continued: Page
Hilton v. Commissioner, 74 T.C. 305 (1980) 14

Investment Research Ass'ns & Sub. and Burton W.

and Naomi R. Kanter, In re, No. 00-3369 (7th Cir.

Dec. 15, 2000) 5
La Fargue v. Commissioner, 73 T.C. 40 (1979) ............... 14
Kanter v. Commissioner, 337 F 3d 833 (7th Cir.

2003) 5, 11, 15, 16
Kansas City So. Ry. v. Commissioner, 337 F 2d 833

(7th Cir. 2003) 14
Lisle v. Commissioner, 341 F 3d 364 (Sth Cir.

2003) 5, 15, 16

Morgan v. United States, 298 US. 468 (1936) ~................ 9
Murray's Lessee v. Hoboken Land & Improvement

Co., 59 U.S. (18 How.) 272 (1855) 12
Narver v. Commissioner, 75 T.C. 53 (1980) 14
NLRB v. Mackey Radio & Tel. Co., 304 US. 333

(1938) 10
Northern Pipeline Constr. Co. v. Marathon Pipe

Line Co., 458 U.S. 50 (1982) 12
Ocean Sands Holding Corp. v. Commissioner,

4) T.C.M. (CCH) 1 (1980) 14
Richard v. Commissioner, 69 T.C. 750 (1978) .................. 14
Rogers v. Lodge, 458 US. 613 (1982) 13
Rosenbaum v. Commissioner, 45 T.C.M. (CCH) 825

(1983) 11
Seaside Improvement Co. v. Commissioner, 105 F 2d

990 (2d Cir.), cert. denied, 308 U.S. 618 (1939) 10
Stone v. Commissioner, 865 F 2d 342 (D.C. Cir.

1989) .. 11
Tiffany Fine Arts, Inc. v. United States, 469 US.

310 (1985) 13
Towers v. Commissioner, 247 F 2d 233 (2d Cir.

1957), cert. denied, 355 U.S. 914 (1958) 10

Cases—Continued: Page

United States v. Crouch, 566 F.2d 1311 (5th Cir.

BOD eccercsenssesnssestsesemremmntnsnnennnnensnennenCRRERNRRRANTEENENEE ~

Universal Camera Corp. v. NLRB, 340 US. 474
GD cence _ sepruetieepenememmeeemesenen 10

Utica Mut. Ins. Co. v. Vincent, 375 F.2d !29
(2d Cir.), cert. denied, 389 U.S. 839 (1967) ... ..........cececereee 9

Constitution, statutes and rule:

U.S. Const.:
EEE 12
Art. III - eaeaencacaseaeeasaasemmmmmnmmasiemmnmneses 12

Internal Revenue Code (26 U.S.C.):
ee, 10
EE 7
EEE 7
LEE 7
OO 7
OS | 2,7
eee 7
§ 7443A(c) ————— 7,8
§ 7453 apenenspimuamanane 7
0 eee 13
§ 7460(b) meeteesiecamnnieniieamnats 10
a 7, 12

Revenue Act of 1928, ch. 852, § 601, 45 Stat. 791 .... ........ os 10

Tax Ct. R.:

Rule 183 7-8, 11,15

Rule 183(b) 2, 13, 15

Rule 183(c) 8
Miscellaneous:

A. Carter, A History of the English Courts (1944) ............ 12

9 W. Holdsworth, A History of English Law (7th ed.

1926) 12

In the Supreme Court of the United States

No. 03-184

CLAUDE M. BALLARD AND MARY B. BALLARD,
PETITIONERS

v.
COMMISSIONER OF INTERNAL REVENUE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-18a)
is reported at 321 F.3d 1037. The opinion of the Tax
Court (Pet. App. 19a-306a) is unofficially reported at 78
T.C.M. (CCH) 951.

JURISDICTION

The judgment of the court of appeals was entered on
February 13, 2003. The petition for rehearing was

denied on May 5, 2003. Pet. App. 307a. The petition for
a writ of certiorari was filed on August 4, 2003. The
jurisdiction of this Court is invoked under 28 U.S.C.
1254(1). |

(1)

2

STATEMENT

1. Petitioner Claude Ballard was a senior vice-
president of Prudential Life Insurance Co. of America.
Acting with another vice-president of that company
named Robert Lisle and a tax attorney named Burton
Kanter, petitioner participated in a scheme in which
persons seeking to do business with Prudential paid
kickbacks for such business to Kanter. Kanter then
funneled more than $3 million of that money to peti-
tioner through a complex web of corporations, partner-
ships and trusts. Pet. App. 2a-4a. Petitioner received
these kickback payments through a number of devices
—such as deposits by Kanter into a corporation con-
trolled by petitioner, sham loans by Kanter to peti-
tioner, and sham consu!tant payments to members of
petitioner’s family. Jd. at 4a.

Petitioner failed to report the kickbacks he received
as income on his federal income tax returns. After
discovering the kickbacks, the Commissioner issued
notices of deficiency to petitioner, Kanter and Lisle for
the resulting income tax deficiencies and civil fraud
penalties. Pet. App. 5a.

2. Petitioner, Kanter and Lisle each sought review
of the Commissioner’s determinations in the Tax Court.
Pet. App. 19a. ,

After their cases were consolidated in the Tax Court,
the Chief Judge assigned them to be heard by Special
Trial Judge D. Irvin Couvillion pursuant to 26 U.S.C.
71443A(b)(4). After a lengthy trial, the Special Trial
Judge submitted a report on these consolidated cases to
the Chief Judge as required by Tax Court Rule 183(b).
The cases were then referred by the Chief Judge to Tax
Court Judge Howard A. Dawson fer decision. Pet. App.
5a-6a, 3lla. On December 15, 1999, the Tax Court

3

issued an opinion in the consolidated cases which states
that “[tJhe Court agrees with and adopts the opinion of
the Special Trial Judge, which is set forth below.” Jd. at
38a. This opinion of the Tax Court sustained the major
portion of the deficiencies and penalties determined by
the Commissioner.

3. Petitioner, along with Kanter and Lisle, there-
after filed a motion seeking access to “all reports, draft
opinions or similar documents, prepared and delivered
to the Court pursuant to Rule 183(b).” Pet. App. 6a. In
the alternative, they asked the Tax Court to make a
copy of such materials a part of the record in the case.
Ibid.; App., infra, la. The Tax Court denied this
motion, stating that (id. at 2a):

In reviewing the Special Trial Judge’s report, Judge
Dawson gave due regard to the fact that Special
Trial Judge Couvillion evaluated the credibility of
witnesses, as reflected in the Memorandum
Findings of Fact and Opinion (T.C. Memo. 1999-407),
and he treated the findings of fact recommended by
the Special Trial Judge as being presumptively
correct. * * * [T)he provisions of section
+m ae and Rule 183 were followed by the
urt.

The Tax Court emphasized that “Petitioners appear not
to appreciate the distinction between the special trial
judges’ authority to hear cases and prepare proposed
findings and opinions under [26 U.S.C. 7443A(b)(4)} and
their lack of authority actually to decide those cases,
which is reserved exclusively for judges of the Tax
Court.” App., infra, 3a (quoting Freytag v. Commis-
sioner, 501 U.S. 868, 874 (1991)). The Tax Court con-
cluded that, “{iJn any event such materials are confiden-
tial and not subject to production because they relate to

4

the internal deliberative processes of the Court. Cf.
Sec. 7460(b).” App., infra, 3a.

Petitioner then filed a second motion requesting that
the Special Trial Judge’s report be included in the
record under seal. That motion was also denied by the
Tax Court. Pet. App. 6a.

4. Petitioner then moved for reconsideration or for a
new trial. Pet. App. 6a-7a. Attached to this motion was
an affidavit of Randall G. Dick, counsel for Kanter. In
that affidavit. Dick stated that he had been informed by
two or three unnamed judges of the Tax Court that
Specia! Trial Judge Couvillion had recommended in his
“original” report that the kickback “payments made by
‘the [persons seeking to do business with Prudential]
were not taxable to the individual petitioners and that
the fraud penalty was not applicable.” Jd. at 7a, 309a.

The Tax Court denied that motion in an order signed
by Chief Judge Thomas B. Wells, Judge Dawson, and
Special Trial Judge Couvillion. The court stated that
“(t]he only official Memorandum Findings of Fact and
Opinion by the Court in these cases is T.C. Memo. 1999-
407, filed on December 15, 1999, by Special Trial Judge
Couvillion, reviewed and adopted by Judge Dawson,
and reviewed and approved by former Chief Judge
Cohen.” Pet. App. 314a-315a. The Tax Court stated
that the alleged statements purportedly made to Dick
were thus “irrelevant and immaterial.” Jd. at 314a.
The court further stated that (id. at 315a):

Judge Dawson states and Special Trial Judge
Couvillion agrees, that, after a meticulous and time-
consuming review of the complex recurd in these
cases, Judge Dawson adopted the findings of fact
and opinion of Special Trial Judge Couvillion, that
Judge Dawson presumed the findings of fact recom-

5

mended by Special Trial Judge Couvillion were cor-
rect, and that Judge Dawson gave due regard to the
circumstance that Special Trial Judge Couvillion
evaluated the credibility of witnesses.

5. Petitioner, along with Kanter and Lisle, then filed
petitions for mandamus in the Eleventh, Seventh, and
Fifth Circuits, respectively, in which they sought
orders directing Judge Dawson and the Tax Court to
provide them with a copy of the “original” report pre-
pared by Special Trial Judge Couvillion. In the alter-
native, they sought an order directing the Tax Court to
describe any changes made to the initial report sub-
mitted by Special Trial Judge Couvillion. The petitions
for writs of mandamus were denied. Jn re Ballard, No.
00-14762-H (lith Cir. Oct. 23, 2000); In re Investment
Research Associations & Sub. and Burton W. and
Naomi R. Kanter, No. 00-3369 (7th Cir. Dec. 15, 2000);
In re Estate of Robert W. Lisle, No. 00-60637 (5th Cir.
Sept. 18, 2000).

6. After the entry of final decisions, petitioner ap-
pealed to the Eleventh Circuit, Kanter appealed to the
Seventh Circuit, and Lisle appealed to the Fifth Circuit.
All three of these courts of appeals rejected the
assertion that the proceedings in the Tax Court denied
the taxpayers the due process of law. Pet. App. la-18a;
Kanter v. Commissioner, 337 F.3d 833 (7th Cir. 2003);
Lisle v. Commissioner, 341 F.3d 364 (5th Cir. 2003).

In the present case, the court of appeals emphasized
that the fact that the order of the Tax Court was signed
by the Special Trial Judge, as well as by the reviewing
judge and the chief judge, demonstrates “that the
report adopted by the Tax Court accurately reflected
[the Special Trial Judge’s] findings and opinion.” Pet.
App. 10a. Responding to the affidavit of the taxpayer’s

6

counsel, who asserted that the opinion underwent
changes prior to its final adoption by the Tax Court, the
court stated that (id. at 9a-10a):

Even assuming [this] affidavit to be true and afford-
ing Petitioners-Appellants all reasonable inferences,
the process utilized in this case does not give rise to
a due process concern. While the procedures used in
the Tax Court may be unique to that court, there is
nothing unusual about judges conferring with one
another about cases assigned to them. These con-
ferences are an essential part of the judicial process
when, by statute, more than one judge is charged

with the responsibility of deciding the case. And, as -

a result of such conferences, judges sometimes
change their original position or thoughts. Whether
Special Trial Judge Couvillion prepared drafts of his
report or subsequently changed his opinion entirely
is without import insofar as our analysis of the
alleged due process violation pertaining to the
application of Rule 183 is concerned. Despite the
invitation, this court will simply not interfere with
another court’s deliberative process.

ARGUMENT

The decision of the court of appeals is correct and
does not conflict with any decision of this Court or of
any other court of appeals. Further review is therefore
not warranted.

1. Petitioner asserts that his right to due process
was violated when he has not given a copy of the
“original” report of the special trial judge. Petitioner
claims that he has a due process right to examine the
“original” report (Pet. i, 7-27) because a special trial
judge assigned to hear a case is the “fact-finder” (Pet. 3,

7

7-9, 11, 20, 22, 24) whose findings are to be reviewed
under a “clearly erroneous” standard (Pet. 7, 9, 14, 17-
20). Petitioner further contends that the special trial
judge proposed findings that he owed no deficiencies
and that the Tax Court disagreed with those proposed
findings and persuaded the special trial judge to change
his mind through assertedly impermissible “ex parte”
communications with the Special Trial Judge (Pet. 7, 14,
20-23). Finally, petitioner asserts (Pet. 9, 23-24) that it
is necessary to include the “original” report of the Spe-
cial Trial Judge in the record so that the court of
appeals may review the decision of the Tax Court “in
the same manner and to the same extent as decisions of
the district courts” (26 U.S.C. 7482(a)). Each of these
contentions lack merit.

a. Sections 7443A(b)(1)-(3) and (c) of the Internal
Revenue Code permit the chief judge to assign particu-
lar types of cases—which are ordinarily small cases—
to be heard and decided by special trial judges. 26
U.S.C. 7483A(b)(1)-(3), (c). At the time relevant to this
case, Section 7443A(b)(4) of the Code (now subsection
(b)(5)) authorized the chief judge to assign “any other
proceeding” to special trial judges for hearing and
recommended decision only. 26 U.S.C. 7443A(b)(5).
Any decision in this latter category of cases must be
entered by a regular Tax Court judge. The present
case, involving the concealed kickback income received
by petitioner, was assigned to the special trial judge
only for hearing and recommended decision under this
statute. App.,infra,la. —

The Internal Revenue Code does not prescribe proce-
dures to be employed by the Tax Court in its use of
special trial judges. Instead, Congress has authorized
the Tax Court to adopt rules prescribing such proce-
dures. 26 U.S.C. 7443A(a), 7453. Rule 183 of the Tax

8

Court was adopted pursuant to this authority. That
Rule neither authorizes nor requires disclosure to the
parties of the reports and recommendations prepared
by special trial judges. Instead, in light of the require-
ment that cases that are assigned only for hearing by a
special trial judge must ultimately be decided by a
regular judge of the Tax Court (26 U.S.C. 7443A(c)),
Rule 183 notes that the reports prepared by the special
trial judge merely “recommend” findings and that the
judge to whom the chief judge assigns the case “may
adopt the Special Trial Judge’s report or may modify it
or may reject it in whole or in part, or may direct the
filing of additional briefs or may receive further evi-
dence or may direct oral argument, or may recommit
the report with instructions.” Tax Ct. R. 183(c).

A judge of the Tax Court to whom a case is ulti-
mately assigned may thus either (i) adopt or abandon
the special trial judge’s report in its entirety or (ii)
modify or otherwise use the special trial judge’s report
as a step in the fact-finding process. Under Tax Court
Rule 183, as well as under the deliberative processes of
courts generally, communications between the judges
(and special trial judges) to whom a case is assigned for
disposition are not produced or disclosed to the parties.
Pet. App. 2a-3a. See Goetz v. Crosson, 41 F.3d 800, 805
(2d Cir. 1994), cert. denied, 516 U.S. 821 (1995); United
States v. Crouch, 566 F.2d 1311, 1316 (5th Cir. 1978); Jn
re Cook, 49 F.3d 263, 265 (7th Cir. 1995); Fayerweather
v. Ritch, 195 U.S. 276, 306-07 (1904). As the court of
appeals emphasized in this case, “there is nothing
unusual about judges conferring with one another about
cases assigned to them.” Pet. App. 9a.

b. It has, moreover, long been settled that, in cases
in which due process requires a trial-type hearing, find-
ings may be made by an officer who has “heard” the

9

evidence in the sense of having reviewed and consid-
ered the evidence. Due process does not mandate that
the officer charged with making the findings and
decision also have personally observed the testimony in
the case. In Morgan v. United States, 298 U.S. 468
(1936), this Court explained that, while “(t]he one who
decides must hear,” this does not require personal
observation of the witnesses (id. at 481-482) (emphasis
added):

Evidence may be taken by an examiner. Evidence
thus taken may be sifted and analyzed by competent
subordinates. Argument may be oral or written.
The requirements are not technical. But there must
be a hearing in a substantial sense. And to give the
substance of a hearing, which is for the purpose of
making determinations upon evidence, the officer
who makes the determinations must consider and
appraise the evidence which justifies them.

In Morgan, the examiner who personally heard the
testimony declined to prepare a tentative report that
could then be subjected to argument and exceptions
before the Secretary to whom the authority to enter
the decision had been given by Congress. Jd. at 475-
476. In rejecting the contention that such a procedure
was required, this Court stated that, “while it would
have been good practice to have the examiner prepare a
report and submit it to the Secretary and the parties,
and to permit exceptions and arguments addressed to
the points thus presented * * * we cannot say that
that particular type of procedure was essential to the
validity of the hearing * * * .” Jd. at 478. Similarly, in
Utica Mutual Insurance Co. v. Vincent, 375 F.2d 129,
131 (2d Cir.), cert. denied, 389 U.S. 839 (1967), the court
rejected the contention that, “when there are issues of

10

credibility * * * no determination of fact may be made
unless the decider has either seen the witnesses himself
or has been furnished with a report as to credibility by
another.” The court stated that “[e]ven on issues where
due process requires a ‘trial type’ hearing, the due
process clause makes no such inexorable command.”
See NLRB v. Mackey Radio & Tele. Co., 304 U.S. 333,
350-351 (1938).

In the analogous circumstance in which a case that
has been tried by one judge of the Tax Court is then
reviewed by the full Tax Court, Congress has made
clear since the very origins of that court that the “origi-
nal” opinion of the judge who presided at trial is to be
excluded from the record.’ Revenue Act of 1928, ch.
852, § 601, 45 Stat. 791 (codified at 26 U.S.C. 7460(b)).
And, the courts of appeals have consistently rejected
the contention that these procedures contravene due
process. Estate of Varian v. Commissioner, 396 F.2d
753 (9th Cir.), cert. denied, 393 U.S. 962 (1968); Heim v.
Commissioner, 251 F.2d 44 (8th Cir. 1958). See Towers
v. Commissioner, 247 F.2d 233 (2d Cir. 1957), cert.
deneid, 355 U.S. 914 (1958); Halle v. Commissioner, 175
F.2d 500, 504 (2d Cir. 1949), cert. denied, 338 U.S. 949
(1950); Seaside Improvement Co. v. Commissioner, 105
F.2d 990, 992 (2d Cir.), cert. denied, 308 U.S. 618 (1939).

ce. Contrary to petitioner’s contention, a regular
judge of the Tax Court is not to limit his review of
recommended findings of a special trial judge through

! There is no merit to petitioner’s assertion (Pet. 16, 18 n.15)
that Universal Camera v. NLRB, 340 U.S. 474 (1951), supports his
contention that an “original” report of a special trial judge must be
included in the record. In Universal Camera, it was the governing
statute that required that an examiner’s report be included in the
record. Jd. at 493. In the present case, neither 26 U.S.C. 7443A
nor Rule 183 contains such a requirement.

1]

application of a “clearly erroneous” or other deferential
standard of review. The requirement of Rule 183 that
“due regard” be given to the proposed findings of the
special trial judge does not effectively transfer the
authority to make decisions in such cases from the
regular trial judges to the special trial judges.
Congress has not granted authority to the chief judge
of the Tax Court to allow special trial judges to decide
cases that must be assigned to regular judges for
decision. Regular judges are therefore not to defer to,
or apply a “clearly erroneous” standard in reviewing,
the proposed findings of special trial judges in such
cases. See, e.g., Colorado v. New Mexico, 467 U.S. 310,
317 (1984) (in reviewing exceptions to findings of a
special master, tle special master’s findings “deserve
respect and a tacit presumption of correctness” but “the
ultimate responsibility for deciding what are correct
findings of fact remains with us”); Kanter v.
Commissioner, 337 F.3d at 843-844.”

2 Prior to the adoption of the Tax Court’s current rules, one
court of appeals had held that the recommended findings of special
trial judges of the Tax Court should be reviewed by a judge of the
Tax Court under a clearly erroneous standard. Stone v. Commis-
sioner, 865 F.2d 342 (D.C. Cir. 1989), rev’g Rosenbaum v. Com-
missioner, 45 T.C.M. (CCH) 825 (1983). As the Fifth Circuit
pointed out in Freytag v. Commisisoner, 904 F.2d 1011 (1990),
aff'd, 501 U.S. 868 (1991), however, Stone was decided under the
prior rules of the Tax Court that provided that litigants were to be
furnished with copies of special trial judges’ proposed findings and
conclusions and then given an opportunity to take exception
thereto, with only the exceptions to be reviewed by a regular
judge of the Tax Court. 904 F.2d at 1015 n.8. By eliminating those
procedures, the Tax Court Rules now make it clear that review by
a regular judge of a special trial judge’s report is not an appellate
review but is an exercise of the regular trial judge’s original fact-
finding authority. /bid.

12

2. Petitioner also errs in asserting that Tax Court
Rule 183 violates his rights to due process because it
departs from “traditional practice” and common law
(Pet. 12-13). At common law, tax controversies were
resolved in a branch of the “court of exchequer” and
were not “judicial controversies * * * according to the
ordinary course of the common law or equity.”
Murray's Lessee v. Hoboken Land and Improvement
Co., 59 U.S. (18 How.) 272, 282 (1855). The Exchequer
was analogous to an administrative agency. 9 W.
Holdsworth, A History of English Law 239 (7th ed.
1926)); A. Carter, A History of the English Courts 51
(1944). Unlike litigation that must be assigned to an
Article III court for adjudication, tax cases may be
resolved in Article I legislative courts, for they are
“public rights” cases which “Congress may or may not
bring within the cognizance of the courts of the United
States, as it may deem proper.” Crowell v. Benson, 285
U.S. 22, 51 (1932), quoting Murray’s Lessee, 59 U.S. (18
How.) at 284; see Northern Pipeline Constr. Co. v.
Marathon Pipe Line Co., 458 U.S. 50, 68, 70 n.22 (1982);
Ex parte Bakelite Corp., 279 U.S. 438, 451 (1929).
There is thus no “traditional practice” or “common law”
requirement that Tax Court judges operate in a manner
precisely identical to Article III courts. Instead, “the
Chief Judge [may] assign any Tax Court proceeding,
regardless of complexity or amount, to a special trial
judge for hearing and the preparation of proposed
findings and written opinion.” Freytag v.
Commissioner, 501 U.S. at 877.

3. Petitioner claims, in the alternative (Pet. 24-25),
that an “original” report of a special trial judge must be
provided to the parties and included in the record in
order for a court of appeals properly to review a deci-
sion of the Tax Court. Under 26 U.S.C. 7482(a), the

13

courts of appeals are to review “decisions” of the Tax
Court “in the same manner and to the same extent” as
decisions of the district courts in civil actions tried
without a jury. The report of a special trial judge, how-
ever, is plainly not the “decision” of the Tax Court. 26
U.S.C. 7459; Tax Ct. R. 183(b). It is the decision of the
Tax Court, not the recommendation of the special trial
judge, that is the subject of the appellate jurisdiction of
the courts of appeals.

Moreover, as the court of appeals emphasized i in this
case, “[t)}he record reveals, and we accept as true, that
the underlying report adopted by the Tax Court is Spe-
cial Trial Judge Couvillion’s.” Pet. App. 10a (emphasis
added). The Tax Court made that same factual deter-
mination in rejecting the identical arguments raised by
petitioner in the proceedings below. App., infra, 2a; see
pages 4-5, supra. These factual determinations, “con-
curred in by two lower courts” (Rogers v. Lodge, 458
U.S. 613, 623 (1982)), do not warrant review by this
Court. Tiffany Fine Arts, Inc. v. United States, 469
U.S. 310, 317-318 n.5 (1985).”

3 Petitioner’s insistent claim that the opinion agreed to and
adopted by the Tax Court was not the opinion of the special trial
judge is refuted by the record. Even assuming that the special
trial judge had a view of petitioner’s case at the time he submitted
his “original” report that differed from the views that are reflected
in the opinion ultimately entered in the case, it does not follow that
the opinion adopted by the Tax Court was not, in fact, the opinion
of the special trial judge. To the contrary, the opinion of the Tax
Court (Pet. App. 33a) and an order signed by Special Trial Judge
Couvillion himself (id. at 7a) make clear that the opinion of the
court does accurately set forth the opinion reached by Special Trial
Judge Couvillion. It is, of course, possible that Judge Couvillion
may have revised his views of the case during the deliberative pro-
cess, but “there is nothing unusual about judges conferring with
one another about cases assigned to them * * * [ajnd, as a result

14

4. Petitioner asserts that the Tax Court routinely
makes changes to the “original” reports prepared by
special trial judges without telling the parties. Peti-
tioner claims (Pet. 9-10) that this is evidenced by the
absence of any indication in 765 cases decided since
1984 (when the Tax Court rules were changed to their
current form) that the “original” report had been
amended before its adoption by the Tax Court. During
the period from 1976 through 1984, however, when
parties were provided copies of reports of special trial
judges and afforded an opportunity to file exceptions
thereto (see note 2, supra), there were only six cases
(out of approximately 680 decisions) in which the Tax
Court did not adopt the opinion of the special trial
judge. And, in only one of those opinions did the re-
viewing judge of the Tax Court disagree with or
“reverse” the special trial judge. See Kansas City So.
Ry. v. Commissioner, 76 T.C. 1067 (1981); Narver v.
Commissioner, 75 T.C. 53 (1980); Hilton v. Commis-
sioner, 74 T.C. 305 (1980); La Fargue v. Commissioner,
73 T.C. 40 (1979); Richard v. Commissioner, 69 T.C. 750
(1978); C. Blake McDowell, Inc. v. Commissioner, 67
T.C. 1043 (1977). There is thus no factual basis for
petitioner’s unsupported assertion that when (as in the
present case) the Tax Court issues an opinion that
adopts the report of a special trial judge, it fails accu-

of such conferences, judges sometimes change their origina! posi-
tion or thoughts.” Jd. at 9a.

* In several other cases (14 out of approximately 680 cases
involving special trial judges that were decided between 1976 and
1984), the Tax Court adopted the opinion of the special trial judge
with modifications that were, in most instances, described as
“minor.” See Ocean Sands Holding Corp. v. Commissioner, 41
T.C.M. (CCH) 1, 2 (1980).

15

rately to set forth the view of the special trial judge in
the case.

Nor do the communications that occur among judges
with a collaborative responsibility represent prohibited
ex parte communications. As the Tax Court empha-
sized in this case, internal communications among
judges and special trial judges are part of the internal
deliberative process of the court. App., infra, 3a. As
the court of appeals correctly observed, “there is noth-
ing unusual about judges conferring with one another
about cases assigned to them * * * [ajnd, as a result of
such conferences, judges sometimes change their origi-
nal position or thoughts” (Pet. App. 9-10a). See
Checkosky v. SEC, 23 F.3d 452, 489-490 (D.C. Cir. 1994)
(“{iJn agencies as in courts, votes are not final until
decisions are final; and decisions do not become final
until they are released, accompanied by an explanation
of the reasons for the result”; “the exchange of draft
opinions can and does change votes”). This form of
collaborative judicial process, whether in the Tax Court
or in other courts in which a shared decisional process
occurs, does not violate due process.

5. The only appellate decisions that have addressed
the questions presented in this case are fully in accord
with the decision of the Eleventh Circuit in this case.
The Seventh Circuit in Kanter, supra, and the Fifth
Circuit in Lisle, supra, both rejected the assertion that
the special trial judge procedures of Rule 183 violate
the due process rights of taxpayers. In Kanter, the
court concluded that Tax Court Rule 183(b) does not
require disclosure of a special trial judge’s “original”
report and does not create a two-tier, appellate type
relationship between a special trial judge and regular
judge of the Tax Court. 337 F.3d at 843-844, 879-884.
The court further held that the Rule does not require a

16

regular judge to review recommendations of a special

trial judge under a clearly erroneous standard and does"

not prohibit collaboration between a special trial judge
and regular judge. /d. at 840-844, 877- 879.

In concluding that due process does not require that
a copy of the special trial judge’s “original” report be
provided to taxpayers, the Seventh Circuit in Kanter
noted and agreed with the reasoning adopted by the
Eleventh Circuit in this case. 337 F.3d at 843-844, 878-
879. The Fifth Circuit reached the same conclusion in
Lisle, 341 F.3d at 384. There is thus no conflict among
the circuits nor other reason to warrant certiorari in
this case.

CONCLUSION
The petition for a writ of certiorari should be denied.

Respectfully submitted.

THEODORE B. OLSON
Solicitor General

EILEEN J. O'CONNOR
Assistant Attorney General

KENNETH L. GREENE

STEVEN W. PARKS
Attorneys

OCTOBER 2003

APPENDIX

UNITED STATES TAX COURT
Washington, D.C. 20217

Docket Nos. 43966-85,712-86, 45273-86, 1350-87,
31301-87, 33557-87, 3456-88, 30830-88, 32103-88,
27444-89, 16421-90, 25875-90, 26251-90, 20211-91,
20219-91, 21555-91, 21616-91, 23178-91, 24002-91,
1984,92, 16164-92, 19314-92, 23743-92, 26918-92,
7557-93, 22884-93, 25976-93, 25981-93

INVESTMENT RESEARCH ASSOCIATES LTD., AND
SUBSIDIARIES, ET AL, PETITIONERS

v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

ORDER

On April 20, 2000, petitioners filed a document enti-
tled Motion for Access to Original Special Trial Judge
Report Prepared Under Rule 183(b) and a supporting
Memorandum of Points of Authorities. The motion
seeks access to “all reports, draft opinions or similar
documents prepared and delivered to the Court pur-
suant to Rule 183(b)”. If the motion is denied, petition-
ers request that the Court certify the issue for an
interlocutory appeal pursuant to Rule 193, Tax Court
Rules of Practice and Procedure. In the alternative,
petitioners have requested that “a copy of the re-
quested materials be made part of the record herein for
review by the Circuit Court of Appeals”.

(la)

2a

These consolidated cases were assigned by the Chief
Judge to be heard by Special Trial Judge Couvillion
pursuant to section 7443A(b)(4), Internal Revenue
Code, and Rule 183(a). They were heard in Chicago,
Illinois. After a lengthy trial, consisting of testimonial
and voluminous documentary evidence, and the_-filing of
briefs (totaling 4,768 pages with respect to 41 litigated
issues), Special Trial Judge Couvillion submitted his
report containing findings of fact and opinion pursuant
to Rule 183(b), which ultimately became the Memoran-
dum Findings of Fact and Opinion (T.C. Memo. 1999-
407) filed on December 15, 1999.

In accordance with Rule 183(c), the Chief Judge
referred the cases to Judge Dawson for review and, if
approved, for adoption. In reviewing the Special Trial
Judge’s report, Judge Dawson gave due regard to the
fact that Special Trial Judge Couvillion evaluated the
credibility of witnesses, as reflected in the Memoran-
dum Findings of Fact and Opinion (T.C. Memo. 1999-
407), and he treated the findings of fact recommended
by the Special T1.. Judge as being presumptively cor-
rect.

The report of the Special Trial Judge, as adopted by
Judge Dawson, was then submitted to and reviewed
and approved by the Chief Judge, who directed that it
be filed as the Court’s Memorandum Findings of Fact
and Opinion. Thus the provisions of section 7443A(b)(4)
and Rule 183 were followed by the Court. See Freytag
v. Commissioner, 501 U.S. 868, 871-875(1991), affg. 904
F.2d 1011, 1014-1015 (5th Cir. 1990); Erhard v. Com-
missioner, 46 F.3d 1470, 1475-1476 (9th Cir. 1995),
which involved identical procedures.

Contrary to petitioners’ assertion, the procedures
pertaining to United States magistrate judges under 28

3a

U.S.C., Sec. 636(b)(1) in hearing nonjury civil cases are
different from those governing special trial judges
under section 7443A(b)(4), I.R.C. and Rule 183. In par-
ticular, consent of the parties is not required in cases
heard by special trial judges; and there is no require-
ment under Rule 183 that the findings of fact and
opinion of a special trial judge be served on the parties
and made subject to objections before being assigned to
a judge for review and adoption. The Supreme Court
expressly stated in Freytag v. Commissioner, 501 U.S.
at 874:

Petitioners appear not to appreciate the distinction
between the special trial judges’ authority to hear
cases and prepare proposed findings and opinions
under subsection (b)(4) and their lack of authority
actually to decide those cases, which is reserved
exclusively for judges of the Tax Court.

Therefore, petitioners’ metion requesting access to
any internal Court documents, including any prelimi-
nary drafts of reports or opinions, documents, memo-
randums or notes by judges, special trial judges or
employees of the Court, will be denied. In any event
such materials are confidential and not subject to pro-
duction because they relate to the internal deliberative
processes of the Court. Cf. Sec. 7460(b); Estate of
Varian v. Commissioner, 396 F.2d 753, 754-755, n.2 (9th
Cir. 1968), affg. 47 T.C. 34 (1966); Heim v. Commis-
stoner, 251 F.2d 44, 48 (8th Cir. 1958), affg. 27 T.C. 270
(1956).

Petitioners next contend that the denial of their
motion for production of documents requires the Court
to certify the issue for the interlocutory appeal pur-

4a

suant to section 7482(a)(2), I.R.C., and Rule 193, Tax
Court Rules of Practice and Procedure.

Section 7482(a)(2) provides in pertinent part:
(a) Jurisdiction.—
(2) Interlocutory orders.—

(A) In general.—When any judge of the
Tax Court includes in an interlocutory order a
statement that a controlling question of law is
involved with respect to which there is a sub-
stantial ground for difference of opinion and
that an immediate appeal from that order may
materially advance the ultimate termination of
the litigation, the United States Court of Ap-
peals may, in its discretion, permit an appeal to
be taken from such order, if application is made
to it within 10 days after the entry of such
order.

* * *

In sum, certification of an order pursuant to section
7482(a)(2) is appropriate where the judge verifies that
the order: (1) Involves a controlling question of law,
(2) with respect to which there is a substantial ground
for difference of opinion, and (3) an immediate appeal
from that order may materially advance the ultimate
termination of the litigation. Failure to meet any one of
the three requirements is grounds for denial of certi-
fication. See General Signal Corp. v. Commissioner,
104 T.C. 248, 251 (1995), citing Kovens v. Commis-
sioner, 91 T.C. 74, 77 (1988).

As explained in Kovens v. Commissioner, supra at
78, the proper application of section 7482(a)(2) requires

5a

a balancing of the policies favoring interlocutory ap-
peals, i.e., avoidance of wasted trial and harm to liti-
gants, against the policies underlying the so-called final
judgment rule, i.e., avoidance of piecemeal litigation
and dilatory and harassing appeals. In Kovens, we
observed:

If the avoidance of wasted trial is taken as the sole
guide, a multitude of interlocutory opinions will
become appealable. This is contrary to the intent of
the draftsmen and proponents of 28 U.S.C. sec.
1292(b) (1958) and section 7482(a)(2), who were of
the view that interlocutory orders should be
granted only in exceptional cases. See 3 U.S. Code
Cong. & Admin. News, at 5255, 5259, 5260-5261
(1958). Such a desire to limit availability of this
process to exceptional cases reflects a strong policy
in favor of avoiding piecemeal review and its
attendant delay and waste of time. * * * [Id.]

Petitioners contend that these cases involve a con-
trolling question of law for which there is a substantial
ground for difference of opinion and that an immediate
appeal may materially advance the ultimate termina-
tion of the litigation. We disagree. We are not per-
suaded that there are substantial grounds for difference
of opinion on the points raised in petitioners’ motion.
Likewise, the issues presented and decided in Jnvest-
ment Research Associates, Ltd., and Subsidiaries, et al.
v. Commissioner, T.C. Memo. 1999-407, do not justify
certification for immediate appeal. Final decisions in
those cases have not yet been entered by this Court. In
our view an immediate appeal on the issues raised in
petitioners’ motion would not materially advance the
ultimate termination of the litigation in these cases, but

6a

rather prolong it, thus defeating the purpose of section
7482(a)(2).

Considering all of the circumstances, and balancing
the policies underlying section 7482(a)(2) against the
final judgment rule, these cases do not represent the
type of exceptional cases warranting an interlocutory
appeal. Consequently, we will deny petitioners’ request
for certification for an interlocutory appeal. -

Finally, for reasons previously stated, we will deny
petitioners’ request that copies of any of the requested
materials be made a part of the record in these cases for
review by the Circuit Court of Appeals. See Estate of
Varian v. Commissioner, supra.

Accordingly, after due consideration, it is ORDERED:

1. That petitioners’ Motion for Access to Original
Special Trial Judge Report Prepared Under Rule
183(b) is denied in all respects.

2. That petitioners’ request to certify this issue
for an interlocutory appeal pursuant to section
7482(a)(2), I.R.C., and Rule 193, is denied.

3. That petitioners’ request that a copy of the
requested materials be made a part of the record in
these cases for review by the Circuit Court of
Appeals is denied.

/s/) HOWARD A. DAWSON, JR.
HOWARD A. DAWSON, JR.
Judge

Dated: Washington, D.C.
April 26, 2000

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0699%3A03. Public record. Not legal advice.