Dixon v. Comm'r , 92 T.C.M. 245 ( 2006 )

T.C. Memo. 2006-190
UNITED STATES TAX COURT
JERRY AND PATRICIA A. DIXON, ET AL.,1 Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
1
This Memorandum Opinion supplements Dixon v. Commissioner,
T.C. Memo. 2006-90. Cases of the following petitioners have been
treated as related to the above-captioned case for purposes of
giving effect to the mandates of the Court of Appeals for the
Ninth Circuit in Dixon v. Commissioner, 316 F.3d 1041, 1047 (9th
Cir. 2003), as amended Mar. 18, 2003 (Dixon V), revg. and
remanding T.C. Memo. 1999-101 (Dixon III): Robert H. and Barbara
A. Gridley, docket Nos. 10588-83, 10931-84, 38757-84; Norman W.
and Barbara L. Adair, docket Nos. 17642-83, 38965-84, 35608-86,
479-89, 8070-90; Ronald L. and Mattie L. Alverson, docket No.
17646-83; Russell L. Fleer, Sr., and Sally A. Fleer, docket Nos.
27053-83 and 13477-87; Hoyt W. and Barbara D. Young, docket Nos.
4201-84, 22783-85, 30010-85; Robert L. and Carolyn S. DuFresne,
docket Nos. 15907-84, 30979-85; John L. and Terry E. Huber,
docket No. 20119-84; Arden L. and Barbara G. Blaylock, docket No.
28723-84; Terry D. and Gloria K. Owens, docket No. 40159-84;
Richard and Fiorella Hongsermeier, docket No. 29643-86; Willis F.
McComas II and Marie D. McComas, docket No. 19464-92; Wesley
Armand and Sherry Lynn Cacia Baughman, docket No. 621-94; Joe A.
and JoAnne Rinaldi, docket No. 7205-94; Norman A. and Irene
Cerasoli, docket No. 9532-94; Stanley C. and Sharon A. Titcomb,
docket No. 17992-95; Richard B. and Donna G. Rogers, docket No.
17993-95. The 27 related cases have been consolidated for
briefing and opinion.
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Docket Nos. 9382-83, 10588-83, Filed September 7, 2006.
17642-83, 17646-83,
27053-83, 4201-84,
10931-84, 15907-84,
20119-84, 28723-84,
38757-84, 38965-84,
40159-84, 22783-85,
30010-85, 30979-85,
29643-86, 35608-86,
13477-87, 479-89,
8070-90, 19464-92,
621-94, 7205-94,
9532-94, 17992-95,
17993-95.
John A. Irvine and Henry G. Binder, for petitioners in
docket Nos. 9382-83, 15907-84, and 30979-85.
Joe Alfred Izen, Jr., for petitioners in docket Nos.
17642-83, 4201-84, 38965-84, 40159-84, 22783-85, 30010-85,
35608-86, 479-89, and 8070-90.
Robert Alan Jones, for petitioners in docket Nos. 17646-83,
10931-84, 38757-84, 19464-92, 621-94, and 9532-94.
Declan J. O’Donnell, for petitioners in docket Nos.
10588-83, 27053-83, 28723-84, and 13477-87.
Michael Louis Minns and Enid M. Williams, for petitioners in
docket No. 29643-86.
Joe A. and JoAnne Rinaldi, pro sese in docket No. 7205-94.
Robert Patrick Sticht, for petitioners in docket Nos.
20119-84, 17992-95, and 17993-95.
Henry E. O’Neill and Peter R. Hochman, for respondent.
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SUPPLEMENTAL MEMORANDUM OPINION
BEGHE, Judge: These cases continue before the Court on
petitioners Richard and Fiorella Hongsermeier’s motion under Rule
1612 for reconsideration of our Memorandum Opinion in T.C. Memo.
2006-90 (Dixon VI). Petitioners’ motion arises from litigation
using a test case procedure that resulted in Dixon v.
Commissioner, T.C. Memo. 1991-614 (Dixon II), vacated and
remanded sub nom. DuFresne v. Commissioner, 26 F.3d 105 (9th Cir.
1994), on remand Dixon v. Commissioner, T.C. Memo. 1999-101
(Dixon III), supplemented by T.C. Memo. 2000-116 (Dixon IV),
revd. and remanded 316 F.3d 1041 (9th Cir. 2003) (Dixon V). On
the ensuing remand, Dixon VI responded to the Dixon V primary
mandate with regard to the sanction imposed against respondent;
and Dixon v. Commissioner, T.C. Memo. 2006-97 (Dixon VII), and
Young v. Commissioner, T.C. Memo. 2006-189, responded to the
Dixon V ancillary mandate with regard to petitioners’ appellate
attorney’s fees and costs incurred in Dixon V.
In Dixon V, as a sanction against respondent for the fraud
on the court perpetrated by respondent’s attorneys in the trial
of the test cases that had resulted in the decisions in favor of
respondent against the test case petitioners in Dixon II, the
2
Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code of 1986.
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Court of Appeals mandated that “terms equivalent to those
provided in the settlement agreement” between the IRS and test
case petitioners John R. and Maydee Thompson (the Thompsons) be
extended to test case petitioners and all other taxpayers
properly before that court. Dixon v. Commissioner, 316 F.3d at
1047. It left to this Court’s “discretion the fashioning of such
judgments which, to the extent possible and practicable, should
put these taxpayers in the same position as provided for in the
Thompson settlement.” Id. n.11.
Petitioners primarily ground their motion for
reconsideration of Dixon VI, regarding the sanction to be imposed
on respondent, on allegations that respondent engaged in attempts
at a continued coverup of the fraud of respondent’s attorneys and
that this Court did not properly address that alleged continued
misconduct in Dixon VI.3 Petitioners ask the Court to reopen the
record in Dixon VI and impose additional sanctions on respondent
for respondent’s alleged continued misconduct. Because the Court
3
Petitioners in their motion also ask us to change two
holdings of our Dixon VI opinion, our handling of the Thompsons’
sec. 6651(a) late-filing addition, and the cutoff date of
deficiency interest accruals against Kersting project
petitioners, described infra in text following note 9 as items
(3) and (4). Petitioners made their arguments on these issues in
their opening brief, and Dixon VI adequately addresses them.
Consequently, we decline to change our handling of the 1981 late-
filing addition or the cutoff date on the deficiency interest
accruals. See Estate of Quick v. Commissioner, 110 T.C. 440, 441
(1998).
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is considering similar allegations by other taxpayers in motions
for leave to file motions to vacate stipulated decisions that
were never appealed and have become final, we granted
petitioners’ motion for reconsideration and ordered and received
respondent’s response to petitioners’ motion. However, we
conclude in this Supplemental Memorandum Opinion that the law of
the case and the primary mandate of the Court of Appeals in Dixon
V preclude us in the cases at hand from conducting any further
inquiry into respondent’s misconduct and from imposing any
additional sanction on respondent with respect to cases of
taxpayers, including petitioners, who were properly before that
court.4
Background
For purposes of this motion, we incorporate our findings in
Dixon III and IV, as modified by Dixon V and VI. We begin by
setting forth the background pertinent to this Supplemental
Memorandum Opinion.
Respondent determined deficiencies and additions to tax
against petitioners and other taxpayers who participated in tax
4
We note that the law of the case and the mandates of the
Court of Appeals for the Ninth Circuit in Dixon V do not preclude
this Court from making such an inquiry in addressing motions for
leave to file motions to vacate stipulated decisions filed by
taxpayers who were not properly before the Court of Appeals.
See, e.g., motions for leave filed by Jesse M. and Lura L. Lewis
in docket Nos. 15673-87, 18551-88, 29429-88, regarding Lewis v.
Commissioner, T.C. Memo. 2005-205 (motion for reconsideration
pending).
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shelter programs (the Kersting project) promoted by Henry F.K.
Kersting (Kersting). Respondent’s determinations resulted in the
commencement in this Court of more than 1,800 cases arising from
the disallowance of deductions claimed by participants in the
Kersting programs. Most such participants who filed petitions in
this Court signed “piggyback agreements” with respondent,
agreeing to be bound by the outcome of test cases that had been
selected by respondent’s trial attorney and Brian Seery (Seery),
the attorney originally retained by Kersting to provide
representation in the Tax Court to participants in his programs.
Following Seery’s withdrawal, Kersting engaged Robert J.
Chicoine (Chicoine) and Darrell D. Hallett (Hallett) to represent
the participants in his programs in the Tax Court. Some such
participants, including the Thompsons (who were test case
petitioners), separately retained Luis C. DeCastro (DeCastro) to
represent them in the Tax Court.
DeCastro obtained 20-percent reduction settlements on behalf
of some of the Kersting project participants he represented, as
did Chicoine and Hallett on behalf of other nontest case
petitioners. Chicoine and Hallett disclosed the 20-percent
reduction settlement to the test case and nontest case
petitioners who had inquired about the possibility of a more
advantageous settlement than the 7-percent reduction project
settlement respondent had been offering.
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Chicoine and Hallett’s settlement efforts displeased
Kersting. Kersting fired Chicoine and Hallett and retained Joe
Alfred Izen, Jr. (Izen), to try the Kersting project test cases
on behalf of the petitioners.
Before the trial of the Kersting project test cases,
DeCastro, on behalf of the Thompsons, and respondent’s trial
attorney, Kenneth W. McWade (McWade), with his immediate
supervisor, William A. Sims (Sims), agreed to a secret settlement
they did not disclose to respondent’s management, the attorneys
or other test case petitioners, or the Tax Court. The purpose
and effect of this settlement was to provide refunds to the
Thompsons that were used to pay DeCastro’s attorney’s fees to
represent the Thompsons in the test case trial as consideration
for the Thompsons’ staying in the test case array and Mr.
Thompson’s testifying at the test case trial.
McWade also entered into a secret pretrial settlement with
pro se test case petitioners John R. and E. Maria Cravens (the
Cravenses) that was much less advantageous to them than the
Thompson settlement was to the Thompsons or the 20-percent
reductions obtained by DeCastro and by Chicoine and Hallett was
to other Kersting program participants. The Cravens settlement
was on the order of but slightly less advantageous to the
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Cravenses than respondent’s 7-percent reduction project
settlement offer, which had been available to Kersting project
participants during 1982 through 1988.
In Dixon II, the Court sustained almost all of respondent’s
deficiency determinations in the test cases. After the Court
entered decisions for respondent in the test cases in accordance
with Dixon II, respondent’s management discovered the Thompson
and Cravens settlements and disclosed them to the Court. On June
9, 1992, respondent filed motions for leave to file motions to
vacate the decisions entered against the Thompsons, the
Cravenses, and another test case petitioner, Ralph J. Rina
(Rina). Respondent asked the Court to conduct an evidentiary
hearing to determine whether the undisclosed agreements with the
Thompsons and the Cravenses had affected the trial of the test
cases or the opinion of the Court. In the meantime (on May 14,
1992), the other test case petitioners, who continued to be
represented by Izen, had appealed the Court’s decisions against
them.
On June 22, 1992, the Court granted respondent’s motions to
vacate the decisions filed in the Thompson and Cravens cases and
denied respondent’s request for an evidentiary hearing. By order
dated June 22, 1992, the Court also denied respondent’s motion to
vacate the decision against Rina, on the ground that the
testimony, stipulated facts, and exhibits relating to the
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Thompson and Cravens cases had no material effect on the Court’s
Dixon II opinion as it related to Rina.
On July 22, 1992, Izen filed a motion for reconsideration of
the Court’s order denying respondent’s motion to vacate the
decision in the Rina case. By order dated August 4, 1992, the
Court denied Izen’s motion for reconsideration.5
On July 16, 1992, DeCastro had filed a motion for entry of
decision in favor of the Thompsons in accordance with the terms
of their settlement with respondent. Respondent’s motion for
entry of decision and supporting memorandum in opposition to
DeCastro’s motion for entry of decision disclosed to the Court
the facts that had been uncovered in respondent’s investigation.
These included the fact that the purpose and effect of the
Thompson settlement was to provide refunds to the Thompsons that
were used to pay DeCastro’s attorney’s fees to represent the
Thompsons as consideration for staying in the test case array and
Mr. Thompson’s testifying at the test case trial. The Court
entered decisions in favor of the Thompsons and the Cravenses in
accordance with their settlements but allowed the adverse
decisions against other test case petitioners to stand.
Thereafter, Izen and Robert Patrick Sticht (Sticht), on
5
Rina appealed this denial. Unlike the Thompsons and the
Cravenses, Rina had no settlement agreement with respondent’s
trial attorney. On June 13, 1995, Rina agreed to the entry of a
stipulated decision in the amounts originally determined in his
statutory notice of deficiency.
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behalf of various nontest case petitioners, filed separate
motions with the Court to intervene in the Thompson and Cravens
cases. The Court denied these motions to intervene.6
In January 1993, after respondent’s management had
discovered the Thompson settlement and disclosed it to the Court
and while the other test cases were on appeal, respondent made a
project settlement offer to nontest case petitioners. This
offer, which in effect reinstated respondent’s earlier project
settlement offer to reduce Kersting deficiencies by 7 percent,
was substantially less advantageous to petitioners than the
Thompson settlement. More than 400 nontest case petitioners
accepted respondent’s reinstated project settlement offer.7
6
Neither the Thompsons nor the Cravenses appealed the
decisions giving effect to their settlements. Izen and Sticht
separately appealed the orders denying their motions to intervene
in the Thompson and Cravens cases on behalf of the nontest case
petitioners in various courts, including the Courts of Appeals
for the Second, Ninth, and Tenth Circuits. All appeals in the
Thompson and Cravens cases eventually were dismissed. In an
unpublished opinion filed June 15, 1994, the Court of Appeals for
the Ninth Circuit stated:
The Tax Court’s August 25 and 26, 1992 decisions
entering settlement in the Cravens and Thompson cases,
respectively, are final. 26 U.S.C. § 7481(a)(1); Fed.
R. App. P. 13. The Tax Court lacks jurisdiction to
vacate those decisions. Billingsley v. CIR, 868 F.2d
1081, 1084 (9th Cir. 1989). Because there is no case
remaining in which the taxpayers can intervene, this
appeal is moot. [Adair v. Commissioner, 26 F.3d 129
(9th Cir. 1994).]
7
There were approximately 100 cases that had settled before
the discovery and disclosure of the misconduct of respondent’s
(continued...)
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On appeal, the test case petitioners represented by Izen
argued that the trial of the test cases had been tainted by the
Thompson and Cravens settlements. The Court of Appeals for the
Ninth Circuit agreed, vacating the decisions in the remaining
test cases and remanding them to this Court with directions “to
conduct an evidentiary hearing to determine the full extent of
the admitted wrong done by the government trial lawyers.”
DuFresne v. Commissioner, 26 F.3d at 107. The Court of Appeals,
citing Arizona v. Fulminante, 499 U.S. 279, 309 (1991), directed
the Court to consider “whether the extent of misconduct rises to
the level of a structural defect voiding the judgment as
fundamentally unfair, or whether, despite the government’s
misconduct, the judgment can be upheld as harmless error.” Id.
Further, the Court of Appeals directed this Court to consider on
the merits all motions of intervention filed by affected parties.
See id.
For purposes of the evidentiary hearing mandated by the
Court of Appeals in DuFresne, and to give effect to the direction
of the Court of Appeals regarding intervention, this Court
ordered that the cases of 10 nontest case petitioners, one docket
7
(...continued)
attorneys, encompassing both the original project settlement
offer (7-percent reductions) and other settlements obtained by
DeCastro and by Chicoine and Hallett (on the order of 20-percent
reductions).
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represented by Izen, some represented by Sticht, and others by
Robert Alan Jones (Jones), be consolidated with the remaining
test cases.8
During the course of the evidentiary hearing mandated by
the Court of Appeals in DuFresne, Izen sought discovery of
documents regarding respondent’s conduct following the trial of
the test cases. Izen alleged, inter alia, that respondent’s
activities after May 1992 amounted to an effort to cover up the
fraudulent conduct of the Government attorneys in the test cases.
The Court denied Izen’s discovery requests. See Dixon III, sec.
III C.
In Dixon III, this Court held that the misconduct of McWade
and Sims in arranging and failing to disclose the Thompson
settlement did not create a structural defect but instead
resulted in harmless error. In Dixon III, the Court nevertheless
imposed sanctions against respondent, holding that Kersting
program participants who had not had final decisions entered in
their cases would be relieved of liability for the interest
component of the addition to tax for negligence under section
8
The nontest cases that were consolidated with the remaining
test cases for purposes of the evidentiary hearing initially
included petitioners represented by Declan J. O’Donnell. Those
petitioners, however, dropped out and did not participate in the
evidentiary hearing, choosing instead to file a motion for
summary judgment to obtain the benefit of the Thompson
settlement. The Court denied the motion in Gridley v.
Commissioner, T.C. Memo. 1997-210.
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6653(a)(1)(B), and incremental interest attributable to the
increased rate prescribed in section 6621(c). In Dixon IV, the
Court awarded additional sanctions against respondent by awarding
petitioners attorney’s fees and costs under section 6673(a)(2)
but declined to impose any further sanctions.
Test case and nontest case petitioners appealed. Izen, in
his brief to the Court of Appeals, argued not only that the
misconduct of respondent’s attorneys was a fraud on the court,
but also that the Tax Court had abused its discretion by denying
petitioners’ discovery requests related to allegations of
respondent’s continued misconduct after the trial of the test
cases. Although the Court of Appeals did not address Izen’s
discovery arguments in its opinion, it commented that
respondent’s disclosure of respondent’s attorneys’ misconduct
“was anything but complete”. Dixon v. Commissioner, 316 F.3d at
1045 n.8.
In Dixon V, the Court of Appeals concluded that “the
misconduct, including its persistence and concealment, did indeed
amount to a fraud on the court.” Id. at 1043. As a sanction
against respondent for the misconduct, the Court of Appeals
mandated that “terms equivalent to those provided in the
settlement agreement with [the Thompsons] and the IRS” be
extended to “Appellants [test case petitioners] and all other
taxpayers properly before this Court”. Id. at 1047. Notably,
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the Court of Appeals did not find that this Court’s evidentiary
hearing or findings of fact on the misconduct of respondent’s
attorneys were inadequate or did not otherwise comply with its
mandate in DuFresne. Nor did the Court of Appeals address much
less find error in this Court’s denial of Izen’s discovery
requests or order us to conduct an evidentiary hearing regarding
the continued misconduct alleged by Izen.
During the proceedings on remand from the Court of Appeals
opinion in Dixon V, this Court, in an order issued October 12,
2004, allowed petitioners’ renewed discovery requests (that the
Court had originally denied in the proceedings on remand from
DuFresne) for the limited purpose of ascertaining respondent’s
understanding of the origins and nature of the Thompson
settlement. With one exception,9 the Court ordered the
9
This Court sustained respondent’s invocation of the
deliberative process privilege to deny petitioners access to the
material described in item 123 of respondent’s privilege log,
because the material was not probative of respondent’s
understanding of the origins and nature of the Thompson
settlement. Item 123 consisted of a chronological file of 16
volumes comprising more than 1,200 items and 5,000 pages created
and maintained by respondent’s counsel Henry E. O’Neill
(O’Neill). However, in note 2 of the Oct. 12, 2004, order, the
Court anticipated and cautioned that the documents and materials
in item 123 might be required to be produced at some later time
in connection with pending and proposed motions for leave to file
motions to vacate decisions in cases in which stipulated
decisions have been entered that may raise questions regarding
the adequacy of respondent’s disclosure of the misconduct of
McWade and Sims and the procedural status of the test cases.
That subject will be addressed in pending proceedings on the
motions for leave to file motions to vacate stipulated decisions
(continued...)
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production of the more than 200 documents and items encompassed
by respondent’s privilege log, as being relevant to that purpose.
In Dixon VI, we held that: (1) The final Thompson
settlement is to be regarded as resulting in a 63.37-percent
reduction of the Thompsons’ deficiencies, as well as elimination
of all Kersting-related penalties and additions; (2) the Thompson
settlement encompasses and requires the vacating of the portion
or portions of the deficiencies determined against any
petitioners that may be attributable to the “Bauspar” shelter
that was also promoted by Kersting; (3) the Thompson settlement’s
cancellation of the Thompsons’ 1981 late-filing addition
justifies cancellation of not only all non-Kersting-related
penalties and additions but also all other substantive
adjustments not arising from shelters promoted by Kersting; (4)
interest on the reduced deficiencies shall not be charged beyond
the date in June 1992 fixed by respondent’s concession and shall
not be stopped as of any earlier date, such as December 1986,
which petitioners contend marked the inception of the fraud on
the court.
9
(...continued)
entered in response to respondent’s project settlement offer of
January 1993 and other settlements of Kersting project cases.
See supra note 4.
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Discussion
In their motion for reconsideration, petitioners ask the
Court to investigate and impose sanctions on respondent for
alleged misconduct that occurred after the trial of the test
cases.
Petitioners argue that there is substantial newly discovered
evidence that respondent’s management made misrepresentations to
cover up the extent of the fraud of respondent’s trial attorneys
and to distort the facts in pleadings filed with this Court in
order to reduce the Government’s monetary exposure and contain
respondent’s public embarrassment and accountability.
Petitioners ask the Court to conduct a further inquiry into
respondent’s alleged coverup misconduct and to impose additional
sanctions on respondent for that misconduct.
Respondent counters that, upon receiving the mandate of an
appellate court, the lower court cannot vary it or examine it for
any purpose other than execution, and that the Tax Court has
fully complied in Dixon VI with the mandate of the Court of
Appeals in Dixon V. We agree with respondent.
The Courts of Appeals have exclusive jurisdiction to review
the 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. Sec. 7482(a)(1). Upon such review, the Courts
of Appeals “have power to affirm or, if the decision of the Tax
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Court is not in accordance with law, to modify or to reverse the
decision of the Tax Court, with or without remanding the case for
a rehearing, as justice may require.” Sec. 7482(c)(1).
Generally, perfection of an appeal of a decision or
certification transfers jurisdiction of the case to the Court of
Appeals; i.e., the jurisdiction of the trial court ceases and
that of the Court of Appeals begins. Griggs v. Provident
Consumer Disc. Co., 459 U.S. 56, 58 (1982). Once an appeal is
commenced, the trial court generally does not have authority to
act upon matters relating to the subject matter of the appeal
until the mandate from the appellate court is returned.10 Hunter
Douglas Corp. v. Lando Prods., Inc., 235 F.2d 631, 632-633 (9th
Cir. 1956); Pollei v. Commissioner, 94 T.C. 595, 600 (1990).
Once an appellate court returns its mandate, jurisdiction over
the case revests in the trial court. United States v. Cote, 51
F.3d 178, 182 (9th Cir. 1995). Under the law of the case
doctrine and the rule of mandate, the trial court’s authority to
address any issues after an appeal is completed is generally
10
There are limited exceptions to this general rule. Even
though an appeal of a judgment is pending in the Court of
Appeals, “the lower court may retain jurisdiction over certain
matters, without appellate court approval or sanction,” e.g.,
matters that are “collateral to the appeal, in aid of the appeal,
to correct clerical mistakes, in aid of execution of a judgment
that has not been superseded, and to maintain the status quo
between the parties pending the appeal.” Pollei v. Commissioner,
94 T.C. 595, 600 (1990).
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limited by any action taken by the appellate court with respect
to those issues during the appeal.
On remand, a trial court may not deviate from the
mandate of an appellate court * * * “[w]hen a case has
been decided by an appellate court and remanded, the
court to which it is remanded must proceed in
accordance with the mandate and such law of the case as
was established by the appellate court.” Firth v.
United States, 554 F.2d 990, 993 (9th Cir. 1977) * * *
The Supreme Court long ago emphasized that when acting
under an appellate court’s mandate, an inferior court
“cannot vary it, or examine it for any other purpose
than execution; or give any other or further relief; or
review it, even for apparent error, upon any matter
decided upon appeal; or intermeddle with it, further
than to settle so much as has been remanded.” In re
Sanford Fork & Tool Co., 160 U.S. 247, 255 (1895).
[Commercial Paper Holders v. Hine (In re Beverly Hills
Bancorp), 752 F.2d 1334, 1337 (9th Cir. 1984);
alteration in the original.]
The “law of the case” doctrine requires a decision on a
legal issue by an appellate court to be followed in all
subsequent proceedings in the same case. Herrington v. County of
Sonoma, 12 F.3d 901, 904 (9th Cir. 1993). The doctrine generally
precludes reexamination of issues decided either expressly or by
necessary implication by the appellate court upon appeal and
applies to the trial court on remand and even to the appellate
court itself upon a subsequent appeal. Pollei v. Commissioner,
supra at 601. The law of the case acts as a bar only when the
issue in question was actually considered and decided by the
first court and does not extend to issues an appellate court did
not address. United States v. Cote, supra at 181-182.
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Upon remand of the case, a corollary of the law of the case
doctrine, known as the rule of mandate, requires the lower court
to implement both the letter and the spirit of the appellate
court’s mandate. The rule of mandate is similar to, but broader
than, the law of the case doctrine and prohibits the lower court
from disregarding the appellate court’s explicit directives.
Herrington v. County of Sonoma, supra at 904. The lower court,
upon receiving the mandate of an appellate court “cannot vary it
or examine it for any other purpose than execution”. In re
Sanford Fork & Tool Co., supra at 255. The appellate court’s
mandate controls all matters within its scope, and the trial
court cannot give relief beyond the scope of the mandate.
Newball v. Offshore Logistics Intl., 803 F.2d 821, 826 (5th Cir.
1986). Thus, a lower court cannot revisit its already final
determinations unless the mandate allows it. United States v.
Lewis, 862 F.2d 748, 750 (9th Cir. 1988).
While a mandate controls all matters within its scope, on
remand a lower court is free to consider any issue not foreclosed
by the mandate. United States v. Kellington, 217 F.3d 1084 (9th
Cir. 2000). Under certain circumstances, the lower court may
issue an order on remand that deviates from the mandate provided
“it is not counter to the spirit of the * * * [appellate] court’s
decision”. Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400, 1404
(9th Cir. 1993).
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In Dixon V, the Court of Appeals considered the misconduct
of respondent’s attorneys in the test cases, determined that the
misconduct constituted fraud on the court, and formulated the
appropriate sanction. The Court of Appeals then mandated that
this Court enter decisions in these cases on “terms equivalent to
those provided in the settlement agreement with [the Thompsons]
and the IRS”. Dixon v. Commissioner, 316 F.3d at 1047. We must
therefore consider whether the issue of respondent’s alleged
continued misconduct following the trial of the test cases was
addressed and disposed of in a prior proceeding so that the Dixon
V mandates foreclosed further inquiry into that subject. See
Sprague v. Ticonic Natl. Bank, 307 U.S. 161, 164 (1939).
In DuFresne v. Commissioner, 26 F.3d at 107, the Court of
Appeals required the Tax Court to “conduct an evidentiary hearing
to determine the full extent of the admitted wrong done by the
government trial lawyers.” During the course of the evidentiary
hearing required by the Court of Appeals in DuFresne, Izen sought
discovery of documents regarding respondent’s conduct following
the trial of the test cases, alleging that respondent attempted
to “cover up” the fraudulent conduct of the Government attorneys
in the test cases. Following the evidentiary hearing mandated by
DuFresne, this Court issued two opinions, Dixon III and Dixon IV,
addressing sanctions against respondent.
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In their motion for reconsideration, petitioners complain
that during the course of the evidentiary hearing conducted on
remand from the Court of Appeals, as required by DuFresne, this
Court denied them access to Government documents that showed the
extent of respondent’s continued misconduct in attempting to
conceal the trial attorneys’ misconduct. Our decisions entered
in accordance with Dixon III and Dixon IV, however, were
appealed. Izen, in his brief on appeal, argued to the Court of
Appeals that the Tax Court abused its discretion by denying
petitioners’ discovery requests related to respondent’s conduct
following the trial.11 Although the Court of Appeals did not
address Izen’s discovery arguments in its Dixon V opinion, it
referred to the “persistence and concealment of the misconduct”,
Dixon v. Commissioner, 316 F.3d at 1043, and commented that
respondent’s disclosure of the misconduct “was anything but
complete”. Id. at 1047 n.8. In formulating the Thompson
settlement sanction mandated by Dixon V, the Dixon V panel was
aware and took into account that respondent’s conduct following
the trial of the test cases had been less than exemplary.
The alleged misconduct of respondent’s managers following
the trial of the test cases was directly in issue in the prior
11
In the Court’s evidentiary proceedings on the Dixon V
mandate, the Court required the production of the bulk of the
materials to which petitioners had been previously denied access,
as a means of helping the Court to ascertain “respondent’s
understanding of the origins and nature of the Thompson
settlement.” See supra notes 4 and 9 and accompanying text.
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proceedings before the Court of Appeals and before this Court.
We therefore hold that the issue in the cases at hand was covered
by necessary implication by the opinion of the Court of Appeals
in Dixon V and by its most recent primary mandate. Consequently,
the Dixon V mandate bars this Court from considering petitioners’
requests in the cases at hand to conduct a further inquiry into
respondent’s alleged continued misconduct and to impose sanctions
against respondent for misconduct alleged to have occurred
following the trial, opinion, and original decisions in the test
cases.
Petitioners do not argue in their motion for reconsideration
that further inquiry into respondent’s alleged continued
misconduct would be necessary or helpful in obtaining a better or
more accurate sense of the terms and application of the Thompson
settlement. Nor do we believe such an inquiry would have any
such effect. In these circumstances, to engage in a further
inquiry in the cases at hand (which encompass all pending cases
in the Kersting project in which final decisions have not been
entered) with a view to imposing additional sanctions on
respondent would be inconsistent with and beyond the scope of the
mandate of the Court of Appeals in Dixon V. The decision by the
Court of Appeals in Dixon V not to address Izen’s complaints
about this Court’s restraints on his discovery efforts--which
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have been largely mooted by the Court’s discovery rulings in the
most recent evidentiary hearings--buttresses this conclusion.
To reflect the foregoing,
Decisions will be
entered under Rule 155.