Byrne v. United States
| Decision Date | 02 October 2018 |
| Docket Number | Case No. 2:06-cv-12179 |
| Parties | ROGER BYRNE, Plaintiff v. UNITED STATES OF AMERICA, DEPARTMENT OF TREASURY - INTERNAL REVENUE SERVICE, and DEPARTMENT OF JUSTICE, Defendants |
| Court | U.S. District Court — Eastern District of Michigan |
II. REPORT
As an initial matter, it is helpful to identify the parties in this more than decade-old case. As alleged in various pleadings, Eagle Trim, Inc. commenced operations in January 1999. (DE 1 ¶ 10.) Roger Byrne was the President. (DE 1 ¶ 7.) Bernard Fuller was the corporate controller from the commencement of operations until February 2001, when he was terminated for "accounting malfeasance." (DE 1 ¶¶ 10, 20-21.) Eric C. Kus is "a responsible person of Eagle Trim Incorporated, who willfully failed to collect, truthfully account for, or pay over the withheld federal income and employment taxes due and owing from Eagle Trim Incorporated[.]" (DE 6 at 9 ¶ 7.)
At the heart of this case are penalties assessed for failing to pay employment tax. Specifically, on July 25, 2005, the Internal Revenue Service (IRS) assessed Kus a penalty in the amount of $382,048.01 for the 2nd quarter of 2000, a penalty of $35,609.01 for the 3rd quarter of 2000, and a penalty of $438,011.33 for the 4th quarter of 2000. (DEs 11-3, 11-6, 11-9.) On August 23, 2005, Kus completed claims for refund and requests for abatement for the second, third and fourth quarters of 2000. (DEs 11-5, 11-8, 11-11.) By a letter dated April 13, 2006, the IRS informed Kus that his claims for refund and abatement were disallowed. (DE 11-12.)
Byrne filed this lawsuit against the United States of America on May 11, 2006. (DE 1.) The Government filed a counterclaim on July 14, 2006, which added counter-defendants Kus and Fuller. (DE 6.) Plaintiff filed a cross-claim against Kus and Fuller on July 28, 2006. (DE 7.) On September 5, 2006, Kus filed cross-claims against Fuller and Byrne and a counterclaim against the United States (DEs 9, 10, 11).
On October 5, 2007, the Government, Byrne and Kus had filed motions for summary judgment. (DEs 24-27.) Among other things, Kus and Byrne attached their deposition transcripts, the deposition transcript of Bernard Fuller, the affidavit of Andrew Jones - Americord, Inc.'s CFO / Eagle Trim's Group Controller, and the affidavit of Anthony Pierfelice - a Certified Turnaround Professional - to their dispositive motions. (DEs 24-9, 24-10, 24-11, 24-12, 24-13; DEs 27-3, 27-4, 27-5, 27-6, 27-10.) The Government attached the declaration of Mark Matheson - a GMAC First Vice President - to its replies, while Kus and Byrne appended Pierfelice's supplemental affidavit to their replies and Byrne attached Jones's supplemental affidavit to his reply. (DEs 32-2, 33-2; DE 35-2, 36-2, 36-3.)
The Court conducted a hearing on February 5, 2008. (DE 44 [Transcript].) On February 28, 2008, the Court entered a stipulated entry of judgment against counterclaim defendant Fuller, only. (DE 39.) On May 12, 2008, this Court granted the United States' motion for summary judgment, denied Byrne's andKus's motions for summary judgment, entered a judgment in favor of the United States and dismissed the case. (DEs 40-41.)
On May 19, 2008, Byrne and Kus filed a joint notice of appeal. (DE 42.) On July 10, 2008, the Government filed its own notice of appeal. (DE 45.) On September 23, 2008, the Sixth Circuit granted the Government's July 25, 2008 motion to dismiss the appeal and cross-appeal. (DE 47-2, DE 47-4.) See Case Nos. 08-1693/1947 (6th Cir.).
On July 2, 2010, the Government moved for entry of judgment based on amounts due on and accruing from June 28, 2010. (DE 47.) On August 17, 2010, the Court granted the motion for entry of judgment and entered judgment in favor of the United States and against Byrne in the amount of $594,774.58 and Kus in the amount of $594,774.84. (DEs 52, 53.)
Kus and Byrne filed notices of appeal in August and October 2010, respectively. (DEs 54, 56.) On September 4, 2012, the Sixth Circuit reversed the district court's grant of summary judgment in favor of the Government and remanded the case for further proceedings. (DE 61 [Case No. 10-02080 (6th Cir.)].) The mandate issued on November 2, 2012. (DE 63.)
Byrne and Kus together filed a renewed motion for summary judgment. (DE 70.) Among the attachments to their separately docketed brief in support is Matheson's supplemental affidavit, dated October 24, 2014. (DE 71-2.) The case was reopened on December 23, 2014 by way of a stipulated order. (DE 72.) On June 16, 2015, this Court denied the renewed motion for summary judgment. (DE 96.)
From June 22 through 24, 2015, Judge Tarnow conducted a bench trial. (See DEs 115-117 [Transcripts].) On August 4, 2015, he entered findings of fact and conclusions of law. (DE 99.) Then, on October 30, 2015, the Court entered judgment in the Government's favor, adjudging that Kus was liable for $533,204.37 and Byrne was liable for $533,213.42. (DE 112.)
Byrne and Kus filed a joint notice of appeal. (DE 113.) On May 15, 2017, the Sixth Circuit concluded that Byrne and Kus "did not willfully fail to pay Eagle Trim's trust-fund taxes[,]" and "vacate[d] the district court's judgment and remand[ed] for further proceedings not inconsistent with [its] opinion." (DE 132 at 4 [Case No. 15-02396 (6th Cir.)].) The mandate issued on August 10, 2017. (DE 133.) On March 30, 2018, the Court entered an order, which, in part, administratively closed the August 11, 2017 motion for judgment. (DE 134, DE 152.) On April 16, 2018, Kus and Byrne filed a joint motion for entry ofjudgment. (DE 153.) On April 20, 2018, this Court entered judgment, which, in part, determined that Kus and Byrne were not liable for the trust fund recovery penalty related to their ownership and operation of Eagle Trim, Inc. (DE 154.)
Currently before the Court are Plaintiff's May 18, 2018 motion for fees and costs pursuant to 26 U.S.C. § 7430 (DE 155) and Kus's May 18, 2018 motion for recovery of attorneys' fees and bill of costs (DEs 156, 157). Judge Tarnow has referred these matters to me for hearing and determination or report and recommendation. (DEs 158, 159.)1
On June 1, 2018, the United States, Kus and Byrne filed a joint motion for briefing schedule. (DE 160.) Although this filing has not been expressly referred to me, it is associated with the matters referred to me. Moreover, I note that the United States, Kus and Byrne have since filed a response and replies, respectively, which are consistent with the proposed briefing schedule. (DEs 161, 163, 164.)
Byrne and Kus bring their motions pursuant to 26 U.S.C. § 7430. In general, this statute provides:
26 U.S.C. § 7430(a). Reasonable litigation costs and reasonable administrative costs are defined by Section 7430(c)(1) and Section 7430(c)(2), and attorneys' fees are defined by Section 7430(c)(3).
Importantly, prevailing party is defined by Section 7430(c)(4) and includes any party which "has substantially prevailed with respect to the amount in controversy," or "has substantially prevailed with respect to the most significant issue or set of issues presented[.]" 26 U.S.C. § 7430(c)(4)(A)(i). However, "[a] party shall not be treated as the prevailing party in a proceeding to which subsection (a) applies if the United States establishes that the position of the United States in the proceeding was substantially justified." 26 U.S.C. § 7430(c)(4)(B)(i).
Byrne argues that he was the prevailing party in this matter and that "[t]he fees and costs incurred were reasonable." (DE 155 at 23-32.) Byrne claims that, since the 2005 assessment, he has incurred "a total of $408,882.50 in attorneys['] fees and $3,141.69 in costs[.]" (DE 155 at 29; see also DE 155 at 6, 15.) Kus argues that: (a) he "timely filed his motion for attorneys' fees[;]" (b) he "is entitled to attorneys' fees under Section 7430 as the prevailing party[;]" (c) "[t]he Government lost on substantially similar issues[;]" and, (d) "[t]he fees and costs incurred were reasonable." (DE 156 at 16-25.) Kus claims that, during a nearly thirteen year period, he has incurred "a total of $271,993 in legal fees and $9,171.04 in costs." (DE 156 at 23.)2
Byrne supports his request for $3,141.69 in costs with a citation to the Sixth Circuit's August 10, 2017 mandate, which notes that a total of $1,645 in costs were to be recovered by "Randolph T. Barker [Byrne's counsel], Scott R. Murphy [Kus's counsel][.]" (DE 155 at 15 n.1, DE 133.) Byrne also refers to attorneyBarker's declaration and provides approximately 238 pages of account statements dated 2002 through 2018. (DE 155 at 15,...
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