Opposition Brief — W. R. Grace & Co.-Conn. v. Department of Revenue of Montana

Supreme Court brief1990

Ask Donna

What actually matters in this document.

Text

ea,

Supreme Coutt va.

| FILED

No. 89-901 ~—

JAN 23 OR

| PH F. SPANIOL, di

In The JOSEP CLERK

Supreme Court of the United States—---

October Term, 1989

—

y W.R. GRACE & CO. - CONN.,

Pettioner,

VS.

DEPARTMENT OF REVENUE OF THE STATE OF

MONTANA and THE STATE TAX APPEAL BOARD

OF THE STATE OF MONTANA,

Respondents.

Petition For A Writ Of Certiorari To The

Supreme Court Of The State Of Montana

BRIEF IN OPPOSITION TO

PETITION FOR CERTIORARI

Ap.

PauL VAN TRICHT*

Special Assistant Attorney General

Office of Legal Affairs

Department of Revenue of

The State of Montana

Mitchell Building <

Helena, Montana 59620

(406) 444-3341

Attorney for Respondent,

Department of Revenue of

the State of Montana

January, 1990 *Counsel of Record

COCKLE LAW BRIEF PRINTING CO, (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

Should this Court grant a Petition for Certiorari when:

1. The record of the case does not contain

any basis for the allegations raised in the

Petition?

2. The Petitioner created a very incomplete

and inaccurate “record” from bits and pieces of

depositions and materials from other cases?

3. The Petitioner did not timely raise the

issue before the state courts?

LIST OF PARTIES AND RULE 29.1 STATEMENT

The undersigned, counsel of record for Montana

Department of Revenue, certifies that the following have

an interest in the outcome of this case:

State of Montana

Montana University System

Montana Office of Public Instruction

Lincoln County Government, Lincoln County,

Montana

School District #4, Lincoln County, Montana

ili

TABLE OF CONTENTS

Page

CPR ERE FRIED oc ive cccsvercescreness i

LIST OF PARTIES AND RULE 29.1 STATEMENT... _ ii

TABLE OF CASES AND AUTHORITIES............ iv

ES rb i as oe hes 5 c0e 5s nda vevakes sve’ a

EeeEeemres GIP BEIM CASE... ooo. cece cece evceess 2

et ee 8

REASONS WHY THE PETITION SHOULD BE

a ade aa ee ce Vc haeh oe RA Kee 9

Grace Did Not Timely Raise the Issue Before the

State Courts - The Record Does Not Support

RI ek ee ean n siete aca eeinds 9

-No Significant Due Process Issue Has Been

Raised by the Petition - Federal Court Have

nejected Grace's Argument ...................-. 11

gO i aa pila ti end eee eae 15

Ns is a bony yas She Kes dekes sesene ee Hie la

TABLE OF CASES AND AUTHORITIES

Page

Cases

Aiken County v. BSP Div. of Envirotech Corp., 866

ae ee POE oi cs we eeeansnberunwaee wee 12

Anderson v. City of Bessemer, 470 U.S. 564 (1985) .... 12

Anderson v. City of Bessemer, N.C., 717 F.2d 149

ES NE ha ce Gas faa eccune pasa babede ner ae 12

Bradley v. Maryland Casualty Company, 382 F.2d

A ee re iz, 13

Cardinale v. Louisiana, 394 U.S. 437 (1969)........... 9

Chicopee Manufacturing Corp. v. Kendall Com-

pany, 266 F.2d 719 (ith Cir, 1961) .............-:. 12

Dept. of Revenue v. Countryside Village, 667 P.2d

SUNS. SUMMED 6.5 55 oe Var ce baka sd aeeee een ve 7

Department of Revenue v. Grouse Mountain

Development, 707 P.2d 1113 (Mont. 1985).......... 7

Dept. of Revenue v. St. Tax Appeal Bd., 613 P.2d

re I MUD 9 cc ss a bea ype ehodua Wow tanenas Mena 7

DeVoe v. Dept. of Revenue of Montana, 759 P.2d

cog A ee ee ee ne ee 7

Helmmco, Inc. v. Department of Revenue, Mon-

tana First Judicial District, Lewis and Clark

County, Cause Mo. S062 CISC)... ose hsicce scene 4, 11

Hi-Line Radio Fellowship v. Dept. of Rev., 737

Oe eg rer hee 7

In re Colony Square Co., 819 F.2d 272 (11th Cir.,

1987)

TABLE OF CASES AND AUTHORITIES (Cont.)

Page

J. Burns Brown Operating Co. v. Department of

Revenue, Montana First Judicial District, Lewis

and Clark County, Cause No. ADV-89-555 ......... 2

Norfolk Energy, Inc. v. Department of Revenue,

Montana Twelfth Judicial District, Hill County,

Cause No. DV-B9-O08 . « < 5.s< coc ou cauWewneestscces 2, 4

PacifiCorp v. Department of Revenue, Montana

First Judicial District, Lewis and Clark County,

Cause Ne. Ca¥ oO ocscs esa penueenen ees 2, 10, jl

State Dept. of Revenue v. Paxson, 666 P.2d 768

(Mont. 1963) oc «cir d eee eens eee eee ee 7

Udall v. Tallman, 380 U.S. 1 (1965)...........--..---- 7

United States v. El Paso Natural Gas Co., 376 US.

G51 (IGOR) 6 6 cvs oe cage caeasenas eager eee 13, 14

United States v. Marine Bancorporation, 418 U.S.

GOD CRGT@) oo acincccccescsueesaewesses eee 14

W. R. Grace & Company v. Department of Reve-

nue, 779 P.2d 470 (Mont. 1909) .......ccessasnrsin: 8

STATUTES AND RULES

26 USC & TRRTRRD «bois cc eek cheep eeeeee 1,3

Rule 34, MR AGO?. 2.62.0 k cian sceweenes sess enneeeee 1

Rule 3 MRLAGOT. 5. 6.600 8c css iele oper eeneseeree seen 6

Mont. Code Ann. § 2-4-613 (1989)...........-....+: 1]

JURISDICTION

Exception is taken to petitioner’s statement that the

amended petition for rehearing was filed on time. It was

not timely filed with the Montana Supreme Court. The

amended petition for rehearing, which raised the ques-

tion presented in this Petition for the first time, was filed

on September 12, 1989, at least 10 days late under the

rules of the Montana Supreme Court.!

There is no jurisdiction under 28 USC § 1257(a).

1 Rule 34, M.R.App.P., provides “a petition for rehearing

may be filed within 10 days after the decision of the supreme

court has been rendered.” Rule 34, M.R.App.P., is reprinted as

Department’s Appendix A, at la. The decision was rendered

on August 18, 1989. The original petition for rehearing was

filed on August 25, 1989. Grace’s original petition for rehearing

is reprinted as Department Appendix B, at 2a. That petition did

not raise the issue presented in this Petition for Certiorari.

Instead it raised for the first time two federal issues: 1) that the

Montana Supreme Court “is denying taxpayer [Grace] due

process of law and violating the commerce clause [to the U.S.

Const.] by creating a new and additional test not imposed by

the legislature;” and 2) that the Montana Supreme Court “by

applying a different test [for the deductions under the Mon-

tana corporation income tax as opposed to the net proceeds

tax] as to this taxpayer, has denied taxpayer equal protection of

the law (Amendment XIV to the United States Constitu-

tion...) and violated taxpayer’s constitutional rights under

Article 1, Paragraph 8, Clause 3 of the United States Constitu-

tion (commerce clause).” Dept. App. B at 3a-4a. This sequence

of events leads to the suspicion that the Grace decided to take

this case “all the way to the U.S. Supreme Court” and was

casting about for federal issues.

STATEMENT OF THE CASE

This case is unique. It presents no issue of national

concern. Further, the respondent, the Department of Rev-

enue of the State of Montana, (“Department”) disagrees

the allegations in the petitioner’s, W.R. Grace & Co. -

Conn, (“Grace”), statement of the case on many critical

points.

First, Grace has gone outside the record of this case

and created a new record. This manufactured record is

inccmplete and inaccurate. Grace’s statement of the case

was created from selected “excerpts” of depositions and

affidavits in two different cases: Norfolk Energy, Inc. v.

Department of Revenue, Montana Twelfth Judicial District,

Hill County, Cause No. DV-89-089 and PacifiCorp. v.

Department of Revenue, Montana First Judicial District,

Lewis and Clark County, Cause No. CDV-89-344.2

The excerpts from the depositions and affidavits

relied upon by Grace do not reflect what actually hap-

pened in this case.? The deposition of an attorney, David

2 The Norfolk case was settled with the payment of $4.5

million dollars for taxes, interest and penalty after a District

Court, in an original action, independently reached the same

legal decision as STAB. J. Burns Brown Operating Co. v. Depart-

ment of Revenue, Cause No. ADV-89-555, Montana First Judicial

District, Lewis and Clark County, (Decided September 1, 1989).

The PacifiCorp case is on remand back to STAB pursuant to a

November 21, 1989 order which is reprinted as Department

Appendix C at 7a. 3

3 This case was mentioned five times in the Deposition of

Paul Van Tricht, Norfolk Energy, Inc. v. Department of Revenue,

Cause No. DV-89-089 (Mont. Twelfth Judicial District, Hill

County), July 21, 1989. All five references are found in Depart-

ment Appendix D at 16a.

| Woodgerd, who was not directly involved in this case,

does not reflect what happened in this case. Also, Grace

took these excerpts out of context.

Grace’s assertions that alleged ex parte communica-

| tions and standard practices of the State Tax Appeal -

Board of the State of Montana (STAB) were “unbe-

knownst to Grace,” “secret,” and “without notice to

opposing counsel” are not even supported by depositions

and affidavits relied upon by Grace. Those portions of

that record were omitted from Grace’s Appendix.

For example, an excerpt from the Norfolk deposition

rebuts Graces’s central assertions that STAB’s prcecedure

was not known by Grace:

©. And in Grace, Mr. Van Tricht?

A. No recollection of that at all; although I do know

that George Bennett was aware of STAB’s procedure

because he told me.

©. He did what?

A. He was aware of STAB’s standard operating pro-

cedure because he told me he was after the case.

Q. And were you aware of it too?

A. I first became aware of STAB’s standard opera-

tion after George Bennett told me about it. Since you’re

good friends, I assumed he would have told you about

STAB’s standard operating procedure too.

©. That was in the Grace case; is that right?

A. Yes.

. vw

Deposition of Paul Van Tricht, Norfolk Energy Inc. v.

Department of Revenue, Cause No. DV-89-089 (Mont.

Twelfth Judicial District, Hill County), July 21, 1989.

(Dept. App. D at 21a).

Mr. George Bennett was Grace’s local attorney and

has represented Grace throughout these proceedings. He

has practiced before STAB since its creation in the early

1970s. As an experienced practitioner before STAB he was

aware of STAB’s “standard practices.”

STAB’s general practices and procedures were not a

secret. They were the subject of one prior District Court

opinion, Helmmco, Inc. v. Department of Revenue, Montana

First Judicial District, Lewis and Clark County, Cause No.

5082, decided August 13, 1985. Excerpts of that decision

are attached as Department Appendix E at 22a. The Dis-

trict Court decision did not find STAB’s general decision

writing practices unlawful. STAB’s practice was often

announced during or shortly after the hearing. (Grace

App. K at 98a & 100a).

Therefore, this Petition presents several unresolved

critical factual conflicts. Grace is asking this Court to

make findings of fact to resolve these conflicts.

Second, the record of this case shows that STAB’s

substantive decision was uniquely its own. Its firm deci-

sion was reached before the alleged ex parte contact

when STAB dictated the order. (Grace App. I at 88a-89a).

During 3 days of hearings Grace presented seven

witness and many hundreds of pages of exhibits. On

January 9, 1987, after the hearing and before the decision,

Grace submitted a 73 page initial brief which contained

no less than 23 separately numbered requested findings

of fact (27 pages). Excerpts from that brief are attached as

Department Appendix F at 25a. Some of those requested

findings of fact were substantially adopted in the final

order. (Grace App. F at 49a & 53a-56a). On January 9,

1987, the Department also submitted its brief. On Febru-

ary 10, 1987, Grace filed a 30 page reply brief which fully

responded to all the Department’s arguments. Grace had

a full and fair opportunity to present its entire case and

all its arguments to STAB.

STAB did not adopt the Department’s position in

total. Indeed, it ruled against the Department on no less

than seven separate deductions and three points of law.4

STAB’s rulings for and against both the Department and

Grace showed that it carefully considered the evidence,

the witnesses and the case in general in reaching its

decision.

The members of STAB played active roles as the

decision makers. In STAB’s decision there was a dissent

on one issue on which the majority held for the Depart-

ment. That board member also dissented on another issue

which was decided by the majority in Grace’s favor.

(Grace App. F at 73a-74a). A complete record in this case

would show that the local counsel for Grace was con-

tacted by the dissenter and told that a dissent was being

4 STAB allowed Grace almost a half million dollars in

deductions which were not allowed by the Department. These

deductions included the largest single deduction at issue —

hauling and related expenses of $260,000. (Grace App. F, at

51a, 52a, 55a, 57a, 59a, 7la & 72a).

prepared. Grace’s local counsel also was offered the

opportunity to make suggestions on the dissent.

The Department cross-appealed STAB’s decision to

the District Court. That cross-appeal is attached as

Department’s Appendix G at 27a. The Department’s argu-

ments before the District Court mirrored those of Grace.

The Department also felt that STAB’s decision was

“inconsistent.” The District Court dismissed both Grace’s

appeal and the Department’s cross-appeal. (Grace App. D

at 41a).

Third, the record Grace has created does not support

its assertion that it did not discover the alleged ex parte

communications until after the petition for rehearing was

filed with the Montana Supreme Court. In 1988, after the

decision of the state district court, Grace retained a sec-

ond local attorney, Terry B. Cosgrove. (Grace App. B at

19a). Mr. Cosgrove also represented PacifiCorp, and he

took part in the deposition of David Woodgerd on June 6,

1989.5 That portion of the Woodgerd deposition is

attached as Department’s Appendix H at 3la. Mr. Cos-

grove knew of the alleged ex parte communications no

later thatrfone 6, 1989. (Grace App. L at 103a). Yet, Grace

did not raise this issue under Rule 3 M.R.App.P. before

the decision of the Montana Supreme Court on August

18, 1989. It did not raise this issue in its original Petition

for Rehearing on August 25, 1989. It waited over three

months, until September 12, 1989, to raise the issue.

> Mr. Cosgrove was an attorney (employee) for the Depart-

ment in 1973 and 1974. He worked for the Department under

contract until 1985.

Fourth, Grace was not faced by procedural barriers

or an unusually limited scope of review of STAB’s deci-

sion before Montana courts. The standards in Montana

for review of administrative decisions are essentially the

same as those applied to administrative decisions by

federal and other state courts.© When the Montana

Supreme Court has found that STAB has committed an

error, that Court has not hesitated to overturn STAB’s

decision.”

Grace’s complaints about the restrictions on the

scope of review are refuted by the actual review that was

conducted by the Montana Supreme Court:

Neither party contest the valuation of the

deductions declared by Grace nor whether

Grace actually incurred the expenses claimed.

Therefore, the question raised by Grace’s first

issue — whether the deductions are statutorily

permissible — involves only a question of law.

Department’s administrative decisions which are not made

subject to STAB’s de novo review are themselves subject to the

same standard of judicial review in Montana district courts as

STAB decisions.

? See, e.g., Dept. of Revenue v. St. Tax Appeal Bd., 613 P.2d

691 (Mont. 1980), DeVoe v. Dept. of Revenue of Montana, 759 P.2d

991 (Mont. 1988), State Dept. of Revenue v. Paxson, 666 P.2d 768

(Mont. 1983), Dept. of Revenue v. Countryside Village, 667 P.2d

936 (Mont. 1983), and Hi-Line Radio Fellowship v. Dept. of Rev.,

737 P.2d 886 (Mont. 1987). In each case the Montana Supreme

Court reversed a STAB decision in whole or in part. Indeed

that court, in one of the cases which Grace cited for its argu-

ment that it was “confined” by the standards of judicial review,

Department of Revenue v. Grouse Mountain Development, 707 P.2d

1113 (Mont. 1985), in fact, reversed STAB’s decision.

Likewise, the second issue presented for review

- whether the deficiency assessment is barred

by the statute of limitations — involves solely a

question of law. Thus, we will use the broader

“abuse of discretion” standard in our analysis of

both issues. (Emphasis supplied.)

W. R. Grace & Company v. Dept. of Revenue, 779 P.2d 470,

473 (Mont. 1989).8 (Grace App. B at 24a-25a).

The Montana Supreme Court then independently

proceeded to analyze the issues based on the Montana

statutes and its past decisions. Procedural error by STAB

would not change the Montana Supreme Court’s analysis

of the substantive legal issues in this case or the final

outcome on those issues.

SUMMARY OF ARGUMENT

The Petition should be denied because:

1. The record does not support the issue which

Grace has raised in its Petition. Grace has constructed an

incomplete and inaccurate record outside of the official

record. Grace is asking this Court to become a fact finder.

2. The issue raised in this Petition was not timely

raised in or ruled on by the Montana courts.

8 The statute of limitations issue was submitted upon a

‘stipulation of fact as were many of the other issues involved in

this case. (Grace App. F at 46a). Throughout its arguments

before the Montana Supreme Court Grace emphasized that

there was no dispute about the facts.

3. The issue raised in this Petition currently is

before the Montana courts in other cases and will be

resolved by those Montana courts on independent state

grounds.

4. The issue raised in this Petition could not affect

the decision of the Montana Supreme Court which turned

on that court’s legal interpretations of a unique Montana

tax.

5. Since federal courts have already addressed this

general issue and rejected Grace’s argument; no signifi-

cant federal issue has been raised by the Petition.

REASONS WHY THE PETITION SHOULD BE DENIED

GRACE DID NOT TIMELY RAISE THE ISSUE BEFORE

THE STATE COURTS - THE RECORD DOES NOT

SUPPORT GRACE’S PETITION

It is essential for jurisdiction under 28 U.S.C.

§ 1257(a) that “any title, right, privilege of immunity is

specially set up or claimed under the Constitution”

before the state courts in a timely manner. Cardinale v.

Louisiana, 394 U.S. 437 (1969). Despite the knowledge of

the basis for this Petition by its local attorneys, Grace did

not raise this question before the District Court ar before

the Montana Supreme Court in its appeal, or in its origi-

nal petition for rehearing. Grace raised this issue in an

amended petition for rehearing which was filed after the

time allowed by the rules of the Montana Supreme Court.

Fundamental policy considerations underlie this

jurisdictional requirement of 28 USC § 1257(a). First, fed-

eral constitutional issues not raised in the state courts

“are those on which the record is very likely to be inade-

quate, since it certainly was not complied with those

questions in mind.” 394 U.S. 437, at 439. This case illus-

trates that general observation. Here Grace is asking this

Court to consider a constitutional issue with absolutely no

record on that issue. The allegations, which it has manu-

factured for this Court from bits and pieces of the records

of two other cases, are inaccurate and misleading. Since it

consists of the record of other proceedings, it does not

reflect what actually happened in this case. There are

conflicts in this manufactured record that this Court will

have to resolve to reach the issue raised in this Petition.

For example, this Court will have to determine if the

alleged ex parte contacts were truly “without notice to

opposing counsel.” This Court will become a trial court.

Without an accurate record Grace wants this Court to

decide a constitutional issue and significantly expand the

due process clause of the XIV Amendment of the United

States Constitution.

Judicial economy is another reason for this jurisdic-

tional requirement. If a federal question is timely raised

in the state courts, the question might “be blocked” by a

decision of the state court based on independent state

grounds, thereby rendering unnecessary any Supreme

Court review of the federal issue. Ibid.

This case also illustrates that reason. As shown in

Grace’s Appendix this issue has been raised in several

other cases currently pending in Montana courts.

Recently, in the PacifiCorp case the District Court

remanded the case back to STAB because it considered

STAB’s procedure in that case, based upon the record in

-_a"

that case, “unlawful” under Montana law, MCA 2-4-613.

(Dept. App. C at 13a-14a). Although the PacifiCorp deci-

sion appeared to distinguish the facts in that case from

facts in Helmmco, that decision appeared to conflict with

the Helmmco decision. (Dept. App. E at 22a). Both cases

were decided solely upon Montana law.

Given these decisions its clear that the controversy

over STAB’s procedures soon will be finally resolved by

Montana courts. The final resolution probably will be

based solely upon Montana law. Therefore, review by this

Court would be redundant, and the effect of a decision in

this case will be confined to this case alone.

The substantive heart of this case involves two issues

of Montana law which were definitively decided by the

Montana Supreme Court. Procedural error would not

affect the decision of the Montana Supreme Court on

those two issues.

This case is not of sufficient general importance to

merit this Court’s consideration.

NO SIGNIFICANT DUE PROCESS ISSUE HAS BEEN

RAISED BY THE PETITION - FEDERAL COURTS

HAVE REJECTED GRACE’S ARGUMENT

Upon a manufactured, inaccurate record Grace wants

this Court to expand the due process clause of the XIV

Amendment to the United States Constitution. Essen-

tially, Grace wants this Court to issue an advisory opin-

ion, a type of hypothetical declaratory judgment or writ

of supervisory control.

The mere fact that the prevailing party reduced a

court’s decision to writing is not a violation of the

constitution.

Grace has selectively misconstrued the holdings in

several cases. For example, in Anderson v. City of Bessemer,

470 U.S. 564, 572 (1985), this Court held: “Nonetheless,

our previous discussions of the subject suggest that even

when the trial judge adopts proposed ‘findings verbatim,

the findings are those of the court and may be reversed

only if clearly erroneous.” In Anderson this Court

reversed a decision by the 4th Circuit, Anderson v. City of

Bessemer City, N.C., 717 F.2d 149, rehearing and rehearing en

banc denied (4th Cir. 1983), which had reversed a District

Court decision. When the 4th Circuit reversed the District

Court decision in Anderson, it relied upon the same Chi-

copee dicta which is being relied upon by Grace in its

petition. 717 F.2d 149, at 156.

The language quoted by Grace from Chicopee Manu-

facturing Corp. v. Kendall Company, 288 F.2d 719, 724-25

(4th Cir. 1961) cert. denied, 368 U.S. 825 (1961), was dicta

because the federal district court’s decision was reversed

and remanded on the merits of the decision. That dicta

was not been followed in a recent decision by the 4th

Circuit, Aiken County v. BSP Div. of Envirotech Corp., 866

F.2d 661, rehearing denied (4th Cir. 1989), which instead

applied this Court’s decision in Anderson. The 4th Circuit

realized that this Court effectively reversed the dicta in

Chicopee with its Anderson decision.

The Chicopee dicta, although quoted, also was not

followed in a decision by the 8th Circuit in Bradley v.

Maryland Casualty Company, 382 F.2d 415 (8th Cir. 1967).

In Bradley counsel for the defendants apparently prepared

the findings and conclusions and the court’s supporting

memorandum without notice to opposing counsel. On the

issue of whether this practice violated the opposing par-

ties right to due process, the 8th Circuit concluded: “We

see no deprival of any constitutional right or anything

which warrants reversal for this alone.” 382 F.2d 415, at

423.

The most recent case cited by Grace, In re Colony

Square Co., 819 F.2d 272 (11th Cir., 1987), cert. denied, 108

S. Ct. 1271 (1988), holds exactly contrary to Grace’s argu-

ments. Colony Square was in Chapter 11 bankruptcy. At

issue was the ownership and control of assets called

Colony Square Complex. Prudential Insurance moved to

compel compliance with the reorganization plan. After

hearing the case, the judge telephoned Prudential’s law-

yers and informed them that he intended to rule in Pru-

dential’s favor. He asked for draft orders. Colony

Square’s lawyers were not informed. While stating its

disapproval, the 11th Circuit held “[t]he fact that a judge

allowed a litigant to draft the court’s orders does not

automatically invalidate these orders, however.” 819 F.2d

272, at 276.9

9 In United States v. El Paso Natural Gas Co., 376 U.S. 651,

656 (1964), Justice Douglas stated:

There was a trial, and after oral argument the judge

announced from the bench that judgment would be

for appellees and that he would not write an opin-

ion. He told counsel for appellees ‘Prepare the find-

ings and conclusions and judgment.’ They obeyed,

submitting 130 findings of fact, and one conclusion

(Continued on following page)

In Colony Square the Circuit Court further found there

was no denial of due process because the judge had

already made his decision when he called Prudential’s

attorneys and because Colony had ample opportunity to

present its arguments. “Having reviewed the record in

this case we conclude that Colony was not denied due

process.” Ibid. (Emphasis supplied.)

Grace has failed to timely raise a substantial federal

question.

(Continued from previous page)

of law, all of which, we are advised, the District

Court adopted verbatim. Those finding, though not

the product of the workings of the district judge’s

mind, are formally his; they are not to be rejected

out-of-hand, and they will stand if supported by

evidence (cite omitted).

If Justice Douglas felt that practice violated a parties right

to due process, he certainly would have said so. This decision

was rendered after Chicopee. Also see United States v. Marine

Bancorporation, 418 U.S. 602, 615, n.13 (1974).

CONCLUSION

For the reasons presented above, the Petition for

Certiorari should be denied.

DATED this 23rd day of January, 1990.

Respectfully submitted,

Paut VAN TRICHT

Counsel of Record

Special Assistant Attorney General

Office of Legal Affairs

Department of Revenue

State of Montana

Mitchell Building

Helena, Montana 59620

(406) 444-2852

Attorney for Respondent,

Department of Revenue of

the State of Montana

APPENDIX

APPENDIX A

Rule 34. Petitions for rehearing

When, in appeals or special proceedings, it is ordered

that remittitur, peremptory writ or judgment issue forth-

with, no petition for rehearing will be entertained. In all

other cases a petition for rehearing may be filed within 10

days after the decision of the supreme court has been

rendered, unless the time is shortened or enlarged by

order, and the adverse party shall have 7 days thereafter

in which to serve and file his objections thereto. Exten-

sions of time will be granted only upon showing of

unusual merit, and in no event im excess of 10 days. A

petition for rehearing may be presented upon the follow-

ing grounds and none other: That some fact, material to

the decision, or some question decisive of the case sub-

mitted by counsel, was overlooked by the court, or that

the decision is in conflict with an express statute or

controlling decision to which the attention of the court

was not directed. Oral argument in support of the peti-

tion will not be permitted. Six copies of the petition and

six copies of objections thereto, which may be in type-

written form, shall be filed with the clerk.

APPENDIX B

IN THE SUPREME COURT OF THE

STATE OF MONTANA

NO. 88-266

W. R. GRACE & CO., a

Corporation,

Petitioner/ Appellant,

-VS-

DEPARTMENT OF REVENUE OF

THE STATE OF MONTANA; and

THE STATE TAX APPEAL

BOARD OF THE STATE OF

MONTANA,

Defendants / Respondents.

APPELLANT'S PETITION FOR REHEARING

COMES NOW the Appellant, W. R. Grace & Co., and

for its petition to this Court pursuant to Rule 34 of the

Montana Rules of Appellate Procedure, respectfully

requests the Court to reconsider its decision for following

reasons:

a. Petitioner requests that the Court reconsider its

decision as to the statute of limitations issue and find and

determine that under the law the Respondent, Montana

Department of Revenue, has no jurisdiction or authority

to assess or collect the net proceeds of mines tax deficien-

cies asserted for the taxable years 1977 and 1978.

b. The grounds for this request are the facts and

questions decisive there, submitted by counsel, were

overlooked by the court, viz., the Court in its opinion

rendered August 18, 1989 overlooked and failed to deal

with the extensive and decisive legislative history behind

Chapter 194, Laws of 1983, which resulted in § 15-23-116,

RCM [sic]. That legislative history was submitted to the

State Tax Appeal Board by “Agreed Statement and Stipu-

lation Covering Statute of Limitations Issue” dated

November 26, 1986, and appearing as Tab B in Appel-

lant’s Appendix’s Appellant's Brief filed with this Court.

c. This Court will find on examination of such legis-

lative history that the Montana Legislature in 1983

expressly dealt with the contentions of the taxpayer and

the Department of Revenue as to whether or not there

was a two year or ten year limitation.

d. The Court will find from an examination of this

legislative record that Chapter 194 was enacted as a result

of the presentation by the parties of their contentions as

to the two year or ten year statute of limitations, as one

uniform and comprehensive statute (15-23-116) that lim-

ited DOR in all cases and as to both assessment and

collection of deficiencies with respect to net proceeds.

e. The Court will find from an examination of this

legislative history that the issue involved is not a ques-

tion of repeal by implication. The legislature expressly by

the language of § 15-23-116, RCM [sic], mandated that

there be but one statute controlling and that DOR had no

further or other authority under any other statute,

whether it is the two year or the ten year statute referred

to.

f. Petitioner would again respectfully call the atten-

tion of the Court to this legislative history, and partic-

ularly to the report of the Senate Taxation Committee of

February 9, 1983.

a. The Court in its opinion in this matter, by creat-

ing requirement that costs or expenses to be deductible

for net proceeds tax purposes must be “direct”, has judi-

cially created a test which does not appear in the control-

ling statutes and therefore has denied due process of law

to the taxpayer (Amendment XI to the United States

Constitution and Article II, Section 17 of the Constitution

of the State of Montana), and violated taxpayer’s consti-

tutional rights under Article I, Paragraph 8, Clause 3 of

the United States Constitution (commerce clause).

b. Nowhere in the controlling statutes is there a

requirement that the costs or expenses be “direct.”

c. Thus the Court is denying taxpayer due process

of law and violating the commerce clause by creating a

new and additional test not imposed by the legislature.

a. The Court by its opinion (page 12) distinguishes

the Caterpillar case (633 P.2d 618, 38 State Reporter 1245,

Montana 1981) on the grounds that the tax there involved

was “selfassessing;” and that the net proceeds tax is

“centrally assessed.”

b. In fact the Department of Revenue continually

argued (Respondents’ Brief, p. 56), and STAB specifically

found (Findings, pp. 22-23) that the net proceeds tax is

“self-assessing.”

c. Therefore the test for both the corporation license

tax and the net proceeds tax should be the same since

they are both identical types of taxes according to the

findings in this matter.

d. Thus the Court, by applying a different test as to

this taxpayer, has denied taxpayer equal protection of the

law (Amendment XIV to the United States Constitution

and Article I Section 17 of the Constitution of the State of

Montana), and violated taxpayer’s constitutional rights

under Article I, Paragraph 8, Clause 3 of the United States

Constitution (commerce clause).

WHEREFORE your Appellant respectfully requests

the Court to:

(1) Grant limited rehearing and upon rehearing to

determine as a matter of law that the Department of

Revenue’s asserted deficiencies for 1977 and 1978 are

barred by § 15-23-116, RCM [sic].

(2) Grant limited rehearing and upon rehearing to

determine as a matter of law that the Department of

Revenue’s asserted deficiencies for 1977, 1978 and 1979

are erroneous because there is no legal requirement that

the disputed costs and expenses be “direct.”

DATED this 25th of August, 1989.

PAUL H. FRANKEL

Morrison & Foerster

1290 Avenue of the Americas

New York, NY 10104

TERRY B. COSGROVE

Luxan & Murfitt

Montana Club Bldg., 4th Floor

P.O. Box 1144

Helena, MT 59624

By: /s/ George T. Bennett

GEORGE T. BENNETT

Arcade Building, Suite 3]

111 N. Last Chance Gulch

P.O. Box 1705 7

Helena, MT 59624

ATTORNEYS FOR

APPELLANT

CERTIFICATE OF SERVICE BY MAIL

I certify that on this 25th day of August, 1989, a true

and correct copy of the foregoing APPELLANT'S PETI-

TION FOR PARTIAL REHEARING has been served by

placing the same in the United States mail, postage pre-

paid, and addressed as follows:

PAUL VAN TRICHT

Tax Counsel

Department of Revenue

Mitchell Building

Helena, MT 59620

/s/ George T. Bennett

GEORGE T. BENNETT

APPENDIX C

MONTANA FIRST JUDICIAL DISTRICT COURT

LEWIS AND CLARK COUNTY

PACIFICORP, an Oregon

corporation,

Petitioner, Cause No. CDV-89-344

Vs-

THE DEPARTMENT oF 2? “EMORANGUM AND

)

REVENUE OF THE STATE ’ ORDER

OF MONTANA; and ?

STATE TAX APPEAL }

BOARD OF THE STATE OF }

MONTANA,

)

Respondents.

* * *

BACKGROUND

On May 18, 1989, Plaintiff PacifiCorp filed a petition

for judicial review of the entire decision rendered by the

State Tax Appeal Board (STAB) in Docket No. CT-1985-2.

PacifiCorp requests this Court to review STAB’s decision

to uphold the Department of Revenue assessment against

PacifiCorp of additional taxes due, plus interest, for 1974

through 1979, and the Department’s denial of a refund for

PacifiCorp for the years 1971 through 1979.1 STAB issued

1 The refund requested by PacifiCorp was for $2,369,078

plus interest. The additional tax assessed due to the audit was

approximately $1,116,795, after allowing for a refund of taxes

paid by PacifiCorp affiliates other than Western Minerals and

Resource Development.

(Continued on following page)

its order on February 28, 1989, after hearing the matter on

May 16 through May 20, 1988.

Both the Department of Revenue (hereinafter Depart-

ment) and PacifiCorp have filed cross-motions for partial

summary judgment on one of the issues raised by Pacif-

iCorp’s petition for judicial review. The Department filed

its motion on May 18, 1989, with an accompanying brief.

PacifiCorp filed its motion and accompanying brief on

July 7, 1989. Both parties filed reply briefs and oral argu-

ments were heard on August 30, 1989. The matter is now

deemed submitted for decision.

Reais

FACTS

On February 9, 1989, Dale Dean, Chairman of STAB,

contacted David Woodgerd, the Department’s Chief Legal

Counsel. Woodgerd Aff., pp. 2-3. Dean informed Wood-

gerd that STAB had decided the case of Department of

Revenue v. PacifiCorp, Inc. in favor of the Department,

and requested the Department to prepare a draft decision

document for review by the Board. Dean dictated the

basis of the Board’s decision to Woodgerd and Woodgerd

drafted the findings of fact, conclusions of law, discussion

and order and submitted the draft document to STAB on

about February 22, 1989. Woodgerd Aff,, pp. 2-3. STAB

(Continued from previous page)

Therefore the difference between a full refund and pay-

ment of the tax is almost $3.5 million. Interest continues to

accrue on both the refund request and the assessment. The

total difference including interest is now more than double this

amount.

requested and received a copy of the draft document on a

computer disc for ease in editing. Woodgerd Aff., p. 3.

STAB issued findings of fact, conclusions of law, discus-

sion and order in this case on February 28, 1989. STAB

used the D ment’s draft verbatim, except for the

omission of * and “{” signs and two typegraphical

errors. Vashro Aff., pp. 1-3.

Neither STAB nor the Department gave PacifiCorp

notice of these contacts, a copy of the draft, an oppor-

tunity to respond to the Department’s draft or an oppor-

tunity to submit a similar draft of its own. Woodgerd

Depo, pp. 44, 81.

At the administrative hearing, counsel for PacifiCorp

specifically asked STAB in the Department’s presence

whether STAB. would be willing to receive proposed find-

ings and conclusions from the parties. STAB stated that it

would not. Neither STAB nor the Department stated that

STAB would or might request the prevailing party to

prepare a draft decision in this case. Cosgrove Aff., p. 2;

Ormseth Aff., pp. 1-2; Woodgerd Depo., p. 85.

Since 1985, when Helmmco, Inc. v. Department of Reve-

nue, No. 50827, 1st Jud. Dist. (Mont. 1985) was decided,

the Department has, at STAB’s request, followed the prac-

tice of dropping draft decisions off at STAB, rather than

mailing the drafts with a transmittal cover letter. Wood-

gerd’s understanding of the reason for this practice is that

it is better not to have a transmittal letter so that oppo-

sing counsel would not be aware when the Department

prepared the findings as it did in the Helmmco case.

Woodgerd depo., p. 29.

10a

By chance, on February 22, 1989, Woodgerd met and

spoke with John Shepherd, Pacificorp’s principal repre-

sentative in the litigation. Shepherd Aff., p. 2. Shepherd

inquired of Woodgerd when he thought the decision

would be handed down and how STAB might inform the

parties of its decision. Woodgerd gave no indication that

he had already been contacted by STAB and had in fact

already prepared a draft decision. Instead, Woodgerd

simply replied that STAB would sometimes proceed by

contacting the prevailing party and asking that party to

submit a proposed decision. Shepherd Aff., p. 2. Pacif-

iCorp contends that when Woodgerd and Shepherd

spoke, Woodgerd deliberately kept secret the fact that the

Board had contacted him, informed him of its decision in

favor of the Department, and requested him to prepare a

draft decision for the Board, which he had already com-

pleted. It is not clear from the facts presented how or

when PacifiCorp learned that the Department and not

STAB had drafted the decision in this case.

DISCUSSION

Both the Department and PacifiCorp seek summary

judgment on the question of whether, as a matter of law,

unlawful procedure occurred at the administrative level

when STAB rendered its decision in favor of the Depart-

ment and against PacifiCorp. PacifiCorp also alleges prej-

udicial ex parte communication occurred between STAB

and the Department, such as to violate PacifiCorp’s con-

stitutional due process and statutory rights.

1. Did STAB err in adopting verbatim the findings of

fact and conclusions of law prepared by the Department?

lla

In this case STAB adopted verbatim the findings of

fact and conclusions of law prepared by the Department.

Although the Montana Court has stated that it disap-

proves of this practice, it is not sufficient to constitute

reversible error provided the findings and conclusions

are supported by the evidence presented. Sun Dial Land

Co. v. Gold Creek Ranches, 198 Mont. 247, 645 P.2d 936 at

940 (1982); Tomaskie v. Tomaskie, __ Mont. __, 625 P.2d

536, 38 St. Rep. 416 (1981).

2. Was the contract between STAB and the Department

an ex parte consultation prohibited under MCA 2-4-613?

The Department’s motion for partial summary judg-

ment requests this Court to rule that “there was no

unlawful procedure [by STAB] at the administrative level

as alleged on pages 6 and 7 of PacifiCorp’s Petition for

Judicial Review.” The Department relies heavily on Judge

Loble’s decision in Helmmco, Inc. v. Dept. of Revenue,

supra, for support of STAB’s practice of contacting the

prevailing party without notice to the opposing party.

There are, however, significant differences between Helm-

mco and this case.

In Helmmco, the court upheld STAB’s decision on the

merits after reviewing the entire record. Despite the par-

ties’ failure to object to STAB’s announcement that it

might contact the prevailing party to draft a decision, the

court registered its disapproval of the practice employed

by STAB in adopting the prevailing party’s draft decision.

Helmmco, Inc. v. Department of Revenue, No. 50827, 1st Jud.

Dist., p. 13 (Mont. 1985). :

In this case, STAB solicited, obtained and adopted

verbatim a draft decision, including findings of fact and

12a

conclusions of law, from one party without notice to the

opposing party. The Board did this despite previously

telling both parties that it would not accept any proposed

findings of fact and conclusions of law from the parties.

In support of its position that no unlawful ex parte

contact occurred, the Department cites an Oregon case

where that court held that an attorney had not engaged in

illegal ex parte contact. In re Bernard K. Smith, 295 Or. 755,

670 P.2d 1018 (1983). In Smith, the Oregon court looked at

whether the content of the ex parte communication was

on “the merits of the cause.” Id., 670 P.2D 1020. The court

defined the merits of a proceeding as having to do with

the legal rights or duties of the parties. Id. In that case the

court held that since the ex parte contact did not affect

any legal right or duty of the parties, it was therefore not

on the merits of the cause, and hence not impermissible

ex parte contact. Id.

In this case, the Department implies that since STAB

had already reached its decision and merely requested

the Department to draft a decision in accordance with

that decision, the ex parte contact had no effect on the

case. The Department argues thut the contact between

STAB and the Department was not prohibited as it did

not go to the merits of the decision. However, such a

position does not acknowledge the importance of the

findings of fact and conclusions of law in a proceeding

for judicial review.

PacifiCorp points out that on appeal it is bound by

the findings of fact and conclusions of law contained in

STAB’s order. While the Department was able to draft

these findings and conclusions to its own advantage,

13a

PacifiCorp had neither notice nor opportunity to propose

or argue its own findings or conclusions.

The Department also cites this Court to a recent

Montana Supreme Court decision where the Court denied

both the petition for rehearing on the merits and the

amended petition for rehearing alleging unlawful pro-

cedure very similar to the case here. W.R. Grace v. DOR,

No . 88-266 , decided September 14, 1989, not yet pub-

lished. When the petition for rehearing was filed in Grace,

the time period allowed under Rule 34, M.R.App.P. had

already expired. In denying the petition, the Court gave

no indication as to whether it was denied on substantive

grounds or procedural grounds. Therefore the Grace deci-

sion provides no guidance to this Court for the case at

hand.

In addition, the Department justifies the practice of

having the prevailing party draft decisions on the basis of

the volume of the decisions heard by STAB. However, the

volume of decisions issued by STAB does not preclud2

giving both parties notice and opportunity to submit a

proposed order, findings of fact and conclusions of law.

Having fully considered this matter, the Court con-

cludes that in order to protect the integrity of the admin-

istrative decision-making process, there. must be notice

and opportunity for opposing parties to respond to com-

munications when there is “any connection with any

issue of fact or law.” MCA 2-4-613 (1989).

3. What is the proper remedy for unlawful procedure?

Since PacifiCorp contests the lack of opportunity to

participate by submitting its own proposed findings of

14a

fact and conclusions of order, the proper remedy is to

give PacifiCorp an opportunity to submit its own pro-

posed findings and conclusions. Even though STAB used

unlawful procedure, that does not necessarily warrant

setting aside the entire decision. It would be premature

for this Court to review the merits of STAB’s decision

until both parties have had an equal opportunity to sub-

mit proposed findings and conclusions. Remanding this

case to STAB with instructions to allow both parties an

opportunity to submit their findings and conclusions will

provide adequate relief to PacifiCorp. Moreover, if this

Court were to review the merits without regard to the

unlawful procedure employed by STAB, then STAB

would be free to continue the unlawful procedure which

formed the basis of this dispute.

CONCLUSION

Based on the foregoing, the Court concludes that

STAB’s order dated February 28, 1989 is invalid due to

unlawful procedure and should be vacated. The Court

further concludes that this case should be remanded to

STAB with instructions to accept and consider proposed

findings of fact and conclusions of law from both parties

in this matter before issuing a final order. The parties

should also be given an opportunity to submit additional

argument in support of their positions.

ORDER

NOW, THEREFORE, iT IS ORDERED that STAB’s

order dated February 28, 1989, is hereby set aside and

vacated.

15a

IT IS FURTHER ORDERED that this matter be, and

hereby is, remanded to STAB which shall accept and

consider proposed findings of fact and conclusions of law

and memoranda of points and authorities from both par-

ties before issuing its final order.

DATED this 21st day of November, 1989.

/s/ Thomas Honzel

DISTRICT COURT JUDGE

pe: Terry B. Cosgrove

Milo E. Ormseth

Charles A. Smith

David W. Woodgerd

l6a

APPENDIX D

MONTANA TWELFTH JUDICIAL DISTRICT

HILL COUNTY

NORFOLK ENERGY INC.,

Petitioner, Cause No. DV-89-089

)

-vs- )

DEPARTMENT OF REVE-

NUE OF THE STATE OF }

MONTANA, ,

Respondents )

and

)

BLAINE, CHOUTEAU and

HILL COUNTIES,

Intervenors.

DEPOSITION OF PAUL VANTRICHT

BE IT REMEMBERED, that the deposition upon oral

examination of PAUL VANTRICHT, appearing at the

instance of Petitioner, was heard at the Offices of the

Department of Revenue, State of Montana, Mitchell

Building, Helena, Montana, on the 21st day of July, 1989,

beginning at the hour of 9:30 a.m., before Sherron Wal-

stad, Court Reporter, Notary Public.

* * »

CRARY & HENDRICKSON REPORTING

17 West Sixth Avenue, Power Block West

P.O. Box 1222

Helena, Montana 59624

(406) 443-0080

17a

P. 27 (lines 14 — 24)

Q. (By Mr. Sites] What’s your best recollection at

this point?

A. My best recollection is that I recall them refer-

ring to at least one case.

Q. What case was that?

A. The W. R. Grace versus the Department of Revenue

case.

Q. Do you recall their referring to any other cases?

A. I don’t recall them referring to any other cases.

That does not mean that they didn’t refer to them. That

means I can’t recall at this time.

P. 31 (lines 15) through P. 32 (line 9)

Q. The decision document also contains a discus-

sion, including a number of case law citations.

A. Yes.

Q. Were these cases discussed at the meeting? You

indicated one case was, the Grace case, I believe?

A. Yes. I don’t have the document you’re looking at

in front of me.

Q. (Mr. Sites hands document to Mr. VanTricht.)

Was a case of Hoover and Bracken Energies discussed.

A. Hoover and Bracken Energies? I don’t recall.

Q. Was the case of Exxon Corporation versus Eager-

ton discussed?

18a

A. I don’t recall.

Q. So really the only case that you recall being

discussed is the Grace case; is that correct?

A. That’s the only case that I can recall at this time

being discussed. However, that does not mean that other

cases were not discussed. Again, this wasn’t a discussion.

It was three parties giving me the reasons for their

decision.

P. 35 (line 2) through P.36 (line 20)

Q. Do you know why they contacted you to write a

draft decision for them in this case?

A. No, other than the fact that it is one of their

standard procedures.

Q. Certainly every case that you are involved in

with the board you don’t draft a decision?

A. No. I sometimes lose.

Q. How many decisions have you drafted for the

board?

A. We're talking about decisions which they dic-

tated to me. Oh, golly. I can recall at this time, and there

may be more; let’s see, three or four that I can recall.

There may more.

Q. Do you recall the names of those cases?

A. Hold it. I’ve got to go back, I don’t know what

you mean by decisions. There may have been more, you

know. Well, let’s go back. Could you repeat the question?

19a

Q. How many times has the board requested of you

to prepare draft proposed findings of fact and conclu-

sions of law?

A. Again, it’s maybe four times. They’ve asked me

to prepare orders of other natures.

Q. Right, but a draft decision document similar to

what was prepared in Tricentrol.

A. Right. You’re talking about similar?

Q. Yes.

A. I think four or five.

QO. ges one of them a case called Somont, S-o-m-o-

n-t:

A. Yeah, I believe so, yes.

Q. Vanderpas, V-a-n-d-e-r-p-a-s-s -

A. I believe so, yes.

Q. And Grace?

A. Probably, I think so,

Q.- And Mountain State Resources?

A. I don’t recall Mountain State Resources. | don’t

recall that case, but then again, if it took place over a

couple years ago, I could or couldn’t. I’m not quite sure.

Q. Did the board indicate at the meeting, or at any

time, why it was asking you to prepare the draft decision

document?

A. You mean in so many words?

Q. Yeah. Did they indicate why they were

approaching you in the TriCentrol case?

- 20a

A. Directly, no. I mean, this is their standard

procedure.

P. 61 (line 25) through P. 63 (line 9)

Q. When you say your recollection of the events,

you’re referring to the events in the Pacific Corp.

proceeding?

A. I have almost no - I was not counsel on Pacific

Corp. In fact, I was only vaguely aware that there was

such a thing as Pacific Corp. until recently.

Q. You were tax counsel in Somont?

A. Yes. A Somont case, I’m not sure if there might

have been more than one.

Q. This is a case where you had drafted the

decision document for the Tax Appeal Board; that Somont

case.

A. Yes, I was tax counsel on that Somont case.

Q. Did the board at the conclusion of the hearing, or

otherwise, indicate that the prevailing party might be

requested to draft the decision document?

A. Ican’t recall one way or the other. That case

was four or five years ago, so I have almost no recollec-

tion at all.

Q. How about in Vanderpas; what, if any, indication

A. Again, I have no — nothing at all in my - I

couldn’t state one way or the other.

Q. And in Grace, Mr. VanTricht?

sani Nistetn te

21a

A. No recollection of that at all; although I do know

that George Bennett was aware of STAB’s procedure

because he told me.

Q. He did what?

A. He was aware of STAB’s standard operating pro-

cedure because he told me he was after the case.

Q. And were you aware of it too?

A. I first became aware of STAB’s standard opera-

tion after George Bennett told me about it. Since you’re

good friends, I assumed that he would have told you

about STAB’s standard operating procedure too.

Q. That was in the Grace case; is that right?

A. Yes

22a

APPENDIX E

IN THE DISTRICT COURT OF THE FIRST JUDICIAL

DISTRICT OF THE STATE OF MONTANA, IN AND FOR

THE COUNTY OF LEWIS AND CLARK

* * *

HELMMCO, INC., a

Delaware corporation, No. 50827

Petitioner,

-VS- ORDER CONCERNING

)

) PETITION FOR

DEPARTMENT OF

REVENUE and the JUDICIAL REVIEW

)

STATE TAX APPEAL

BOARD of the

State of Montana,

Respondents

SUMMARY OF ISSUES AND DECISION

P. 12 (line 18) through P. 14 (line 12)

MOTION TO ADMIT EVIDENCE OF OFF RECORD

PROCEDURAL IRREGULARITIES

As concerns this motion, it appears that STAB may

have taken the position, at the time of hearing below, that

neither the Department of Revenue nor taxpayer Helm-

mco should present proposed findings of fact and conclu-

sions of law. Thereafter, it appears that when STAB had

made a determination as to what it wished to do, it asked

the attorneys for the Department of Revenue to prepare

its decision. The Department attorneys did this, and

STAB adopted that proposed decision. As noted above,

the decision did not adopt the original proposal of the

23a

Department for a two factor formula, but, rather, adopted

a position somewhat midway between the positions of

the Department and the taxpayer. Helmmco asserts that it

should have had the right to argue exceptions to the

proposed decision submitted, upon request, to STAB by

DOR.

If the Court granted the motion, and proof was made,

it would according to Helmmco, show the facts to be as

previously set forth by this Court. Our Supreme Court

has indicated that, in the case of district court appeals to

it, the Court does not approve of district judges adopting,

verbatim, the findings of any party. However, as our

Supreme Court has also remarked, the question is

whether the findings of fact and conclusions of law are

“clearly erroneous” upon the record. Speer v. Speer, ___

Mont. __, 654 P.2d 1001, 39 St. Rep. 22064 (1982); Glasser v.

Glasser, Mont. __, 669 P.2d 685, 40 St. Rep. 2204 (1983).

In this case, there is no doubt that the findings which

STAB did adopt are supported by the record, and that the

conclusions of law made by STAB did not constitute an

abuse of discretion nor do they offend against the legisla-

tive intent in adopting UDITPA.

I do not approve of the procedure used by STAB nor

of the wholesale adoption of the proposed findings and

conclusions of any party. Nevertheless, When those find-

ings and conclusions are supported by the record, they

must be upheld by this Court. Helmmco’s motion to

admit evidence of off record procedural irregularities is

denied.

24a

JUDGMENT

NOW, THEREFORE, IT IS HEREBY ORDERED,

ADJUDGED AND DECREED that Petitioner, Helmmco,

shall take nothing by its petition for judicial review, and

the same is denied and dismissed.

DATED this 13th day of August, 1985.

/s/ Henry Loble

DISTRICT JUDGE

cc: Counsel of Record

25a

APPENDIX F

BEFORE THE STATE TAX APPEAL BOARD

OF THE STATE OF MONTANA

W. R. GRACE & CO., a

corporation

renee No. MT-1989-9

DEPARTMENT OF REVENUE OF

THE STATE OF MONTANA

—— eS oe

BRIEF FOR PETITIONER

PAUL H. FRANKEL

W. R. Grace & Co.

Grace Plaza

1114 Avenue of the Americas

New York, NY 10036-7794

GEORGE T. BENNETT

404-406 Fuller Avenue

P.O. Box 1705

Helena, Montana 59624

ATTORNEYS FOR W.R. GRACE &

CO.

[Fr

CONTENTS

Page

PRELIMINARY STATEMENT .............-ccceee: 1

CUBS THe FIED occ ccc dewscevsvevecscens 3

PETITIONER’S REQUEST FOR FINDINGS OF FACT 4

26a

ARGUMENT

Il.

CONCLUSION

The statute of limitations bars an assessment

NE Ee GR ere Perr e ee

The disputed deductions disallowed by the

Department of Revenue (“DOR”) for 1977,

1978 and 1979 are all allowable under

§ 15-23-503 because the moneys involved were

expended for (i) necessary labor, machinery

and supplies needed and used in the ver-

miculite mining operations and developments

of W.R. Grace & Co. (“Grace”) at Libby; (ii)

costs of repairs and replacements of the mill-

ing and reduction works used in connection

with the mine; (iii) transportation of the ver-

miculite from the mine to the mill, the reduc-

tion works and the place of sale; (iv) marketing

the vermiculite; and (v) converting the ver-

miculite into Money ..........--scceesceeeees

“or hk 2 Oe en ee oS a ee ee ee oe ae ee ee 2 ee ae Be ee

27a

APPENDIX G

MONTANA FIRST JUDICIAL DISTRICT COURT,

LEWIS & CLARK COUNTY

W. R. GRACE & COM-

PANY, a corporation, Cause No. ADV 87-610

Petitioner,

RESPONSE OF THE

DEPARTMENT OF REV-

ENUE OF STATE OF

MONTANA AND

CROSS PETITION

-VS-

DEPARTMENT OF REVE-

NUE OF STATE OF MON-

TANA; and THE STATE

TAX APPEAL BOARD OF

THE STATE OF

MONTANA

Respondents

+ * *

COMES NOW the Department of Revenue of the

State of Montana (“Department”) and responds to the

Petition of W.R. Grace & Company (“Grace”):

The Department admits the allegations contained in

paragraphs 1, 3, 5, 6, 7, and 8 of the petition. The Depart-

ment admits the allegations contained in paragraph 4

except it denies the allegation that Grace’s headquarters

in Cambridge, Massachusetts are “supporting facilities”.

The Department denies the allegations contained in

paragraphs 9, 11 and 12 of the petition.

28a

Ili

The Department responds to the allegations con-

tained in paragraph 10 by stating the “disallowed”

deductions are fully set forth in the April 21, 1987 Order

of the State Tax Appeal Board. (Grace’s Exhibit A).

The allegations in paragraphs 2, 13 and 14-do not

require a response.

The petition does not state grounds upon which this

Court can grant Grace any relief.

The Department denies any allegation not admitted

hereinabove and denies any allegation which Grace

alleges as the basis for granting any relief.

CROSS PETITION

VII

The State Tax Appeal Board erred in allowing the

deduction of the following “expenses”:

(a) The watchman expenses;

(b) The reimbursed hauling and related costs dur-

ing period river crossing conveyor was inoperative;

29a

(d) The salaries and benefits for the Manager, Assis-

tant Manager, and Chief Geologist; and

(e) The legal fee of filing water rights claims, and

the consulting fee for obtaining patents on mining claims.

DEMAND

The Department requests the Court to:

1. Dismiss Grace’s petition;

2. Modify the order of the State Tax Appeal Board

by not allowing the deduction of the expenses which are

set forth in paragraph VII hereinabove; and

3. Grant such other and further relief as this Court

deems just and proper.

DATED this 2nd day of July, 1987.

MONTANA DEPARTMENT OF

REVENUE

Office of Legal Affairs

Mitchell Building

Helena, MT 59620-2702

/s/ Paul Van Tricht

PAUL VAN TRICHT

Tax Counsel

—

30a

CERTIFICATE OF SERVICE

I certify that on this 2nd day of July, 1987, a true and

correct copy of the foregoing has been served by placing

same in the United States mail, postage prepaid, and

addressed as follows:

George T. Bennett

111 North Last Chance Gulch

P.O. Box 1705

Helena, MT 59624-1705

Paul J. Frankel

Senior Tax Counsel

W. R. Grace & Co.

1114 Avenue of the Americas

— 44th Floor

New York, NY 10036-7794

O Mario Favorito, Counsel

W. R. Grace & Co.

Industrial Chemicals Group

62 Whittemore Avenue

Cambridge, MA 02140

/s/ Paul Van Tricht

3la

APPENDIX H

MONTANA FIRST JUDICIAL DISTRICT COURT,

LEWIS AND CLARK COUNTY

PACIFICORP, an Oregon

corporation,

Petitioner, No. CDV-89-344

)

THE DEPARTMENT OF REVE- :

NUE OF THE STATE OF MON- }

TANA, and STATE TAX APPEAL }

BOARD OF THE STATE OF ?

MONTANA,

Respondents.

DEPOSITION UPON ORAL EXAMINATION

OF DAVID WOODGERD

BE IT REMEMBERED, that the deposition upon oral

examination of DAVID WOODGERD, appearing at the

instance of Petitioner, was heard at the law offices of

Luxan & Murfitt, Montana Club Building, Helena, Mon-

tana, on the 6th day of June, 1989, beginning at the hour

of 11:00 a.m., pursuant to the Montana Rules of Civil

Procedure, before Laurie Crutcher, Court Reporter,

Notary Public.

32a

APPEARANCES:

ATTORNEYS APPEARING ON BEHALF OF THE

PETITIONER:

MR. PETER R. JARVIS MR. TERRY B. COSGROVE

Attorney at Law Attorney at Law

Stoel, Rives, Boley, Luxan & Murfitt

Jones & Grey Montana Club Building

900 SW Fifth Avenue P.O. Box 1144

Portland, OR 97204 Helena, MT 59624

ATTORNEY APPEARING ON BEHALF OF THE

RESPONDENT:

MS. GERALYN DRISCOLL

Tax Counsel

Department of Revenue

Office of Legal Affairs

Mitchell Building

Helena, MT 59620

ALSO PRESENT: John Shepard

ore te

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.