Bayer v. Comm'r of Internal Revenue

• Decision Date: 09 January 1992
• Docket Number: Docket No. 11408-89.
• Citation: 98 T.C. No. 2,98 T.C. 19
• Parties: NANCY J. JOHNSON BAYER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

98 T.C. 19

98 T.C. No. 2

NANCY J. JOHNSON BAYER, Petitioner,

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

Docket No. 11408-89.

United States Tax Court

Filed January 9, 1992.

R filed a motion for reconsideration of our opinion, T.C. Memo. 1991-282, filed June 24, 1991, in which we concluded that P was entitled to reimbursement for her reasonable administrative and litigation costs under sec. 7430, I.R.C.

Sec. 7430(c)(1)(B)(iii) limits the hourly rate for reimbursement of attorney's fees to $75 “unless the court determines that an increase in the cost of living or a special factor” justifies a higher rate. In our prior opinion, filed June 24, 1991, which followed the opinion of this Court in Cassuto v. Commissioner, 93 T.C. 256 (1989)affd. in part, revd. and remanded in part936 F.2d 736 (2d Cir. 1991), we concluded that cost of living adjustments (COLA's or COLA) to the $75 rate limitation were allowable to P and that the COLA's should be computed from Oct. 1, 1981, the effective date of the Equal Access to Justice Act (EAJA), Pub. L. 96-481, tit. II, 94 Stat. 2325-2330. Shortly thereafter, the Second Circuit reversed part of our decision in the Cassuto case, holding that the COLA's should be computed from Jan. 1, 1986, the effective date of sec. 7430(c)(1)(B)(iii). Respondent immediately filed a motion for reconsideration of our opinion in this case. We have given further consideration to respondent's argument, but are unconvinced.

HELD: The COLA's to the $75 per hour attorney fee reimbursement limitation set forth in sec. 7430(c)(1)(B)(iii) should be computed from Oct. 1, 1981, the effective date of the EAJA. Thomas J. O'Rourke, for petitioner.

Diane Helfgott, for respondent.

SUPPLEMENTAL OPINION

DRENNEN, JUDGE:

This matter is before the Court on respondent's motion for reconsideration of our opinion, T.C. Memo. 1991-282, pursuant to Rule 161. ¹ In that opinion, filed June 24, 1991, we concluded, inter alia, that petitioner was entitled to an award of attorney's fees and litigation costs under section 7430. By order, dated June 27, 1991, the parties were directed to submit a computation of the attorney's fees and costs to which petitioner was entitled under section 7430.

Section 7430(c)(1)(B)(iii) limits the hourly rate for attorney's fees to $75, with allowances for increases in the cost of living or other special factors. We have held that this rate may be adjusted for increases in the cost of living. Cassuto v. Commissioner, 93 T.C. 256, 273 (1989), affd. in part, revd. and remanded in part 936 F.2d 736 (2d Cir. 1991). Respondent does not disagree but argues that the cost of living adjustments (COLA's or COLA) to the $75 per hour rate limitation should be computed from January 1, 1986, the effective date of section 7430(c)(1)(B)(iii), the COLA provision which first imposed the hourly rate limitation in Tax Court cases.

Petitioner, on the other hand, argues that the cost of living adjustments to the $75 per hour rate limitation should be computed from October 1, 1981, the effective date of the Equal Access to Justice Act (EAJA), Pub. L. 96-481, tit. II, 94 Stat. 2325-2330, 28 U.S.C. 2412 (1988), 5 U.S.C. 504 (1982), which first provided for COLA's to attorney fee awards in non-Tax Court cases. Petitioner argues that although the EAJA does not apply to litigation in the Tax Court and section 7430(c)(1)(B)(iii) does, the circumstances under which section 7430(c)(1)(B)(iii) was enacted [to] show that Congress intended to conform the award of attorney's fees under section 7430 to the EAJA to the maximum extent possible. In our opinion issued in this case on June 24, 1991, we concluded that the cost of living adjustments to the $75 rate limit on attorney's fees under section 7430 should be computed from the EAJA's enactment date, October 1, 1981, which is the same conclusion we reached in Cassuto v. Commissioner, supra at 272-273.

The U.S. Court of Appeals for the Second Circuit, in an opinion dated June 26, 1991, reversed our decision in Cassuto v. Commissioner, supra, holding that the cost of living adjustments to the $75 statutory cap on attorney fee awards should be calculated from January 1, 1986, the effective date of section 7430(c)(1)(B)(iii), and remanded that case to this Court. Cassuto v. Commissioner, 936 F.2d at 744. Our opinion in petitioner's case was issued two days before the Second Circuit issued its opinion in Cassuto v. Commissioner, supra. In light of the Second Circuit's reversal on this issue, respondent filed a motion for reconsideration in petitioner's case. The sole issue presented in respondent's motion is what date to use in calculating COLA's to attorney fee awards under section 7430(c)(1)(B)(iii). Petitioner objected, and we took the motion under consideration.

There is no dispute between the parties with respect to the facts and issues here involved. Of course, this Court will honor the mandate of the Second Circuit in the Cassuto case. Furthermore, this Court is bound to similarly decide other cases raising the same issue when those cases are squarely in point and their venue for appeal lies in the Second Circuit. Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir. 1971). However, since petitioner has at all relevant times resided in the District of Columbia and thus venue for any appeal of her case will lie with the United States Court of Appeals for the District of Columbia Circuit, we are not required in her case to follow the mandate of the Second Circuit in Cassuto v. Commissioner, 936 F.2d 736 (2d Cir. 1991), affg. in part, revg. and remanding in part 93 T.C. 256 (1989). Golsen v. Commissioner, supra at 756-757.

We observe that the U.S. Court of Appeals for the District of Columbia Circuit, to which an appeal in this case would lie, has held that the baseline year for calculating COLA's to the $75 cap on attorney's fees provided for in the EAJA is October 1, 1981, the date on which the EAJA became effective, not 1985, when the sunset provision of the EAJA was repealed. Wilkett v. I.C.C., 844 F.2d 867, 874-875 (D.C. Cir. 1988); Hirschey v. F.E.R.C., 777 F.2d 1, 5 (D.C. Cir. 1985). However, the Court of Appeals has not yet decided the precise question raised by respondent's motion, that is, whether cost of living adjustments to the $75 limit provided by section 7430(c)(1)(B)(iii) should be calculated beginning October 1, 1981, the effective date of the EAJA, or January 1, 1986, the effective date of section 7430(c)(1)(B)(iii), which applies to costs of litigation in the Tax Court.

We also observe that the courts which have decided cases involving either of these related issues are not in agreement as to how they should be resolved. Compare Trichilo v. Secretary of Health and Human Services, 823 F.2d 702 (2d Cir. 1987) with Cassuto v. Commissioner, 936 F.2d 736, 742-743 (2d Cir. 1991), affg. in part, revg. and remanding in part 93 T.C. 256 (1989); Bode v. United States, 919 F.2d 1044 (5th Cir. 1990); Mattingly v. United States 711 F. Supp. 1535 (D. Nev. 1989), revd., vacated, and remanded 939 F.2d 816 (9th Cir. 1991).

This situation leaves the Tax Court on the horns of a dilemma. That is, when, as in petitioner's case, the same issue comes before it again -- which appellate court should be followed. The Tax Court's current policy of following its own convictions in such situations was first developed in Lawrence v. Commissioner, 27 T.C. 713 (1957), revd. on other grounds 258 F.2d 562 (9th Cir. 1958). In that case we stated:

One of the difficult problems which confronted the Tax Court * * * was what to do when an issue came before it again after a Court of Appeals had reversed its prior decision on that point. Clearly, it must thoroughly reconsider the problem in the light of the reasoning of the reversing appellate court and, if convinced thereby, the obvious procedure is to follow the higher court. But if still of the opinion that its original result was right, a court of national jurisdiction to avoid confusion should follow its own honest beliefs until the Supreme Court decides the point. The Tax Court early concluded that it should decide all cases as it thought right. [27 T.C. at 716-717; fn. refs. omitted.]

The Lawrence doctrine is still alive except, of course, in cases where a Court of Appeals has handed down a decision squarely in point and appeal from our decision lies to that Court of Appeals. Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970), affd. 445 F.2d 985 (10th Cir. 1971). ²

Under the Tax Court's present policy, as noted by the Fifth Circuit Court of Appeals, the Tax Court, because it has national jurisdiction, “should, except in cases geographically destined for a disapproving Circuit, follow its conviction that its original result was correct until decided otherwise by the Supreme Court.” Delta Metalforming Co. v. Commissioner, 632 F.2d 442, 445 n.4 (5th Cir. 1980), affg. T.C. Memo. 1978-354. Although a series of reversals may incline the Tax Court to bow to higher authority, see Bankers Union Life Insurance Co. v. Commissioner, 62 T.C. 661, 675 (1974), the switching of positions by the Tax Court may lead to confusion or may constitute an improper performance of the Court's function. See Bradford v. Commissioner, 60 T.C. 253, 261 (1973)(Drennen, J., dissenting).

In reviewing the question of what is the correct date to use for calculating COLA's to attorney's fees allowable under section 7430(c)(1)(B)(iii), we have given consideration to the reasoning of the Courts of Appeals reflected in a number of opinions. These include the Second Circuit's opinions in Cassuto v. Commissioner, 936 F.2d 736 (2d Cir. 1991), affg. in part, revg. and remanding in part 93 T.C. 256 (1989), and Trichilo v. Secretary of Health and Human Services, supra; the U.S. Court of Appeals for the District of Columbia's opinions in Hirschey v. F.E.R.C., supra, and Wilkett v. I.C.C., supra; the Fifth Circuit's opinion in Bode v. United...