Rogers v. Internal Revenue Serv.

• Decision Date: 04 May 2016
• Docket Number: No. 15–3409.,15–3409.
• Citation: 822 F.3d 854
• Parties: Jon R. ROGERS, Plaintiff–Appellant, v. INTERNAL REVENUE SERVICE, Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

822 F.3d 854

Jon R. ROGERS, Plaintiff–Appellant

v.INTERNAL REVENUE SERVICE, Defendant–Appellee.

No. 15–3409.

United States Court of Appeals, Sixth Circuit.

Argued: Dec. 2, 2015.

Decided and Filed: May 4, 2016.

ARGUED: Frank J. Bruzzese, Bruzzese & Calabria, Steubenville, Ohio, for Appellant. Gretchen M. Wolfinger, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF: Frank J. Bruzzese, Bruzzese & Calabria, Steubenville, Ohio, David W.T. Carroll, Carroll, Ucker & Hemmer, LLC, Worthington, Ohio, for Appellant. Gretchen M. Wolfinger, Francesca Ugolini, United States Department of Justice, Washington, D.C., for Appellee.

Before: NORRIS, CLAY, and COOK, Circuit Judges.

NORRIS

, J., delivered the opinion of the court which COOK, J., joined, and CLAY, J., joined in part. CLAY, J. (pp. 858–66), delivered a separate opinion concurring in part and dissenting in part.

OPINION

ALAN E. NORRIS

, Circuit Judge.

Plaintiff Jon Rogers (“Rogers”) appeals the district court's grant of summary judgment to defendant Internal Revenue Service (the “IRS”). For the reasons that follow, we affirm the district court's decision.

I.

Before Rogers brought the instant action, the IRS conducted a criminal investigation into several businesses owned by Rogers and two of his associates. Following the investigation, the IRS seized millions of dollars from Rogers and initiated four forfeiture actions in the Western District of Pennsylvania.

The parties subsequently settled the forfeiture actions and executed a settlement agreement on August 1, 2012. The settlement agreement included a release clause, wherein Rogers released his right to bring future claims “related to and/or in connection with or arising out of” the forfeiture actions.

On November 29, 2012, Rogers requested records from the IRS pursuant to the Freedom of Information Act (“FOIA”). 5 U.S.C. § 552

. The IRS denied the request. On August 9, 2013, Rogers filed this FOIA action in the District Court for the Southern District of Ohio.

The parties filed a Rule 26(f) report pursuant to the Federal Rules of Civil Procedure. The report split discovery into two phases. Phase I included a “rolling production report plan” under which the IRS would review the documents it had determined responsive to Rogers' FOIA request. According to the report, Phase I did not constitute formal discovery under Rule 26 of the Federal Rules of Civil Procedure

, and the IRS could move for summary judgment before commencing Phase II.

On November 13, 2014, the IRS moved for summary judgment on the grounds that the parties entered into a settlement agreement which contained a release that affirmatively waived Rogers' right to bring his FOIA action. Rogers opposed the motion, arguing that (1) the IRS forfeited its right to rely on the release clause by not pleading it as an affirmative defense; (2) the IRS should be estopped from asserting the affirmative defense; and (3) the release clause did not apply because the FOIA claim was not related to the forfeiture actions.

The district court rejected Rogers' arguments and granted the IRS's motion for summary judgment. The district court held that the release's language was broad enough to encompass Rogers' FOIA action, noting that it “covers all claims, rights and demands ‘of every kind’ related to the forfeiture actions and discharges the [IRS] from all duties of every kind relating to the actions.”

On April 10, 2015, Rogers filed this appeal. He raises the same arguments stated above.

II.

A. Forfeiture of Affirmative Defense

This Court reviews a finding that a party did not forfeit an affirmative defense for abuse of discretion. See Smith v. Sushka, 117 F.3d 965, 969 (6th Cir.1997)

. “Generally, an abuse of discretion is evident ‘when the reviewing court is firmly convinced that a mistake has been made. A district court abuses its discretion when it relies on clearly erroneous findings of fact, or when it improperly applies the law or uses an erroneous legal standard.’ ” Graham–Humphreys v. Memphis Brooks Museum of Art, 209 F.3d 552, 560 (6th Cir.2000) (brackets omitted) (quoting Romstadt v. Allstate Ins. Co., 59 F.3d 608, 615 (6th Cir.1995) ).

“A district court may, in its discretion, allow a defendant to raise an affirmative defense for the first time in a motion for summary judgment if doing so does not result in surprise or prejudice to the plaintiff.” Lauderdale v. Wells Fargo Home Mortg., 552 Fed.Appx. 566, 573 (6th Cir.2014)

(citing Sushka, 117 F.3d at 969 ).

In determining what constitutes prejudice, the court considers whether the assertion of the new claim or defense would: require the opponent to expend significant additional resources to conduct discovery and prepare for trial; significantly delay the resolution of the dispute; or prevent the plaintiff from bringing a timely action in another jurisdiction.

Phelps v. McClellan, 30 F.3d 658, 662–63 (6th Cir.1994)

.

Rogers notes that Rule 8(c) of the Federal Rules of Civil Procedure

specifies “waiver,” “release,” and “accord and satisfaction” as affirmative defenses that must be raised in responsive pleadings. He argues that the IRS forfeited its right to rely on the release clause because it failed to raise the release as a defense in its answer.

Because we agree with the district court that under the circumstances of this case, Rogers cannot establish the existence of prejudice, we are unable to say the district court abused the discretion afforded it when it permitted the IRS to assert the defense. Rogers argues that he was prejudiced because the IRS allowed litigation to proceed for fifteen months before raising its defense. Although the IRS waited over a year to assert the defense, the delay does not appear to have prejudiced Rogers, since he received documents he was seeking during the rolling production process. And, manifestly, allowing the IRS to assert its affirmative waiver defense does not require Rogers to expend significant additional resources to conduct discovery and prepare for trial, as it puts an end to the litigation.

Similarly, Rogers' contention that he was surprised is without merit. A sophisticated party, he was represented by counsel when he signed the settlement agreement. The same lawyer who signed the settlement agreement represents Rogers in this action. Rogers should have anticipated that the IRS would raise the defense of waiver by release. And, Rogers had actual notice when the IRS raised the defense in its motion for summary judgment, and he was afforded ample opportunity to respond to it. Stupak–Thrall v. Glickman, 346 F.3d 579, 585 (6th Cir.2003)

(“Because the plaintiffs had a fair opportunity to respond to the government's statute of limitations argument, we find that the plaintiffs suffered no prejudice and, therefore, the government did not waive their defense.”); Sushka, 117 F.3d at 969 (“Failure to raise an affirmative defense by responsive pleading does not always result in waiver. The purpose of Rule 8(c) of the Federal Rules of Civil Procedure is to give the opposing party notice of the affirmative defense and a chance to respond.”) (internal citation omitted).

While the IRS could have been more diligent in raising its defense, we are unable to say the district court abused its discretion by permitting the IRS to raise the defense in its summary judgment motion.

B. Estoppel by Conduct and Scope of the Release

Rogers also contended that the IRS should be estopped from raising the release as a defense, and that his FOIA lawsuit does not fall within the scope of the release's language. We now turn to the issues of estoppel and the scope of the release. Having had the opportunity to review the record below, the briefs submitted by the parties, and benefitted from oral argument on these issues, we conclude that the district court correctly rejected Rogers' contentions for the reasons stated by the district court in its order of March 2, 2015, granting summary judgment to the IRS.

Rogers does raise a mutual mistake argument for the first time on appeal. In general, “ ‘[i]ssues not presented to the district court but raised for the first time on appeal are not properly before the court.’ ” McFarland v. Henderson, 307 F.3d 402, 407 (6th Cir.2002)

(quoting J.C. Wyckoff & Assoc., Inc. v. Standard Fire Ins. Co., 936 F.2d 1474, 1488 (6th Cir.1991) ). We therefore decline to consider the argument.

III.

The judgment of the district court is affirmed.

CONCURRING IN PART AND DISSENTING IN PART

CLAY, Circuit Judge, concurring in part and dissenting in part.

I agree with the majority's holding that Rogers waived his ability to bring a FOIA claim against the IRS when he signed the release at issue. I write separately, in part, because I believe the issue—one of first impression in this circuit—merits additional analysis. I also write separately to dissent from the majority's holding that the IRS did not waive the defense of release.

I.

For nearly ten years, the IRS conducted an investigation into several offshore gambling businesses owned by Rogers and two of his partners. The IRS suspected that Rogers and his partners, through their business in Antigua and Belize, illegally accepted sports bets from U.S.-based customers. As a result of the investigation, the IRS filed four civil forfeiture complaints in 2003 and 2004 under 18 U.S.C. §§ 981(a)(1)(A) and (C)

against $10 million in assets allegedly traceable to the gambling business.

On August 1, 2012, Rogers eventually settled the forfeiture cases with the IRS by agreeing to forfeit $500,000 of his individual assets. The settlement agreement contains, in pertinent part, the following release provision:

This release is conditioned upon the United States paying to Jon R. Rogers and releasing from arrest/seizure/freeze that portion of the Jon R. Rogers Assets set forth in paragraph four (4) above. By reason of and in reliance upon this Stipulation and Settlement Agreement, Jon R. Rogers, his assigns, and heirs, hereby unconditionally release and

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