Berks v. U.S., 88-5041
| Decision Date | 31 October 1988 |
| Docket Number | No. 88-5041,88-5041 |
| Citation | 860 F.2d 841 |
| Parties | -5936, 88-2 USTC P 9585 David N. BERKS, Appellant, v. UNITED STATES of America, Appellee. UNITED STATES of America v. David N. BERKS. UNITED STATES of America v. Samuel K. SPAISE. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Jay B. Kelly, St. Paul, Minn., for appellant.
Kimberly S. Stanley, Arlington, Va., for appellee.
Before HEANEY and FAGG, Circuit Judges, and HENLEY, Senior Circuit Judge.
David N. Berks appeals for the second time from an order of the district court 1 denying his motion for attorney fees under 26 U.S.C. Sec. 7430. Berks originally filed his motion after prevailing in an action against the United States for a refund of taxes paid to the Internal Revenue Service. The district court denied the motion and Berks appealed to this court. The panel hearing the appeal determined that, in order for this court to conduct a meaningful review, a remand was necessary for the purpose of obtaining further findings of fact and conclusions of law from the district court. Berks v. United States, 825 F.2d 1262, 1263 (8th Cir.1987). The district court has now filed its findings and conclusions in accordance with the directions on remand, and once again has denied Berks's motion, concluding that the government's litigating position was not unreasonable. From this decision, Berks again appeals. We affirm.
In 1974 Berks formed a joint venture with two other men, Samuel Spaise and Alan Kircher. Their purpose was to own and operate a drying plant that would turn liquids such as whey into powder. Each of the joint venturers formed his own Subchapter S corporation to participate in the joint venture, which they called SKB Products. The joint venture agreement specified that Berks and Spaise were to be the "active managers of the daily operations," with Berks "primarily responsible for production, general office management and office services."
In 1976 Berks sold his interest to Spaise, who previously had bought out Kircher's interest. Ultimately the business was unsuccessful, and Spaise ceased operations in 1978.
Withholding taxes for SKB Products' employees were never paid. The IRS unsuccessfully attempted to collect the taxes from the subchapter S corporations. It next endeavored to collect from the persons who had willfully failed "to collect, truthfully account for or pay over" the taxes. 26 U.S.C. Sec. 6672(a). The agent assigned to the case interviewed Spaise and reviewed certain of the company's records. The district court found that the agent also attempted to interview Berks, but did not receive a response from him after having left a business card at Berks's home. The agent determined that both Berks and Spaise were responsible for $32,483.93 in unpaid taxes. Accordingly, the IRS assessed that amount against the two men.
Berks entered into a payment plan, and then filed suit in district court for a refund. The case was tried to a jury, which returned a verdict for Berks. Berks then moved for $25,000.00 in attorney fees pursuant to 26 U.S.C. Sec. 7430, which authorized an award of attorney fees to a prevailing party who has exhausted administrative remedies. Fees may be awarded, however, only if the government's position in the civil proceeding was unreasonable. 2 The government did not contend that Berks had not prevailed, nor that he had failed to exhaust his administrative remedies, but did assert that its position had been reasonable. As already noted, the case was appealed to this court and remanded; we are now called upon to review the decision of the district court on remand.
Berks claims that the government had no factual or legal basis upon which to contend that he was responsible for the unpaid taxes. We cannot agree. The district court noted that Berks and Spaise's testimony at trial was not in accord on the issues of whether Berks knew of the unpaid taxes and whether he had responsibility for them. Spaise testified that he had considered all of the partners responsible for the taxes, and that he was sure Berks knew the taxes were not paid. Berks testified that Spaise effectively exercised the real control of the company; Spaise countered that the joint venture agreement, giving control to both men, reflected the reality of their relationship. The district court concluded that, while the jury's verdict for Berks was reasonable, it would not have been unreasonable for the...
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