Dahmes Stainless, Inc. v. Commissioner of Revenue

• Decision Date: 01 October 2015
• Docket Number: 8228-R
• Parties: DAHMES STAINLESS, INC., Appellant, v. COMMISSIONER OF REVENUE, Appellee.
• Court: Tax Court of Minnesota

DAHMES STAINLESS, INC., Appellant, v. COMMISSIONER OF REVENUE, Appellee.

No. 8228-R

Tax Court of Minnesota, Regular Division, Kandiyohi County.

October 1, 2015

Attorneys and Law Firms

Mark A. Pridgeon, Attorney at Law, Edina, Minnesota, represented appellant Dahmes Stainless, Inc.

Sara L. Bruggeman and Derek A. Hilding, Assistant Minnesota Attorneys General, represented appellee Commissioner of Revenue.

ORDER GRANTING APPELLANT'S MOTION FOR COSTS DISBURSEMENTS, AND ATTORNEY FEES

JOANNE H. TURNER, Chief Judge.

This matter came before The Honorable Joanne H. Turner, Chief Judge of the Minnesota Tax Court, on the motion of appellant Dahmes Stainless, Inc., for attorney fees under Minn.Stat § 15.471, subd. 8 (2014) (the Minnesota Equal Access to Justice Act or MEAJA), and for costs and disbursements under Minn.Stat. § 271.19 (2014) and Minn. R. 8610.0150 (2015).

Based upon all the files, records, and proceedings herein, the court now makes the following:

ORDER

1. Dahmes' request for an award of attorney fees is granted in the amount of $38, 677.50.

2. Dahmes' request for an award of costs and disbursements is granted in the amount of $2, 565.00.

IT IS SO ORDERED. THIS IS A FINAL ORDER. LET JUDGMENT BE ENTERED FORTHWITH.

MEMORANDUM

At issue in this case is whether the Commissioner of Revenue erred in assessing appellant Dahmes Stainless, Inc., for additional sales and use tax on Dahmes' purchases of material and parts used in the manufacture of Dahmes' industrial drying systems and other products. The Commissioner based her assessment on Minn.Stat. § 297A.61, subd. 4(d) (2014), which requires that tax be charged on purchases of building materials, supplies, and equipment by owners, contractors, subcontractors, and builders if the materials are used in “the alteration repair, or improvement of real property.” We concluded that Dahmes' products are not “real property” within the meaning of Minn.Stat. § 297A.61, subd. 4(d) and therefore the Commissioner erred in assessing Dahmes for additional sales and use tax on those purchases. Findings of Fact, Conclusions of Law, and Order (Apr. 7, 2015).

Dahmes moves for an award of attorney fees under Minn.Stat. § 15 .471, subd. 8 (2014), and for costs and disbursements under Minn.Stat. § 271.19 (2014) and Minn. R. 8610.0150 (2015). The Commissioner opposes Dahmes' request in its entirety. We award Dahmes attorney fees of $38, 677.50 and costs and disbursements of $2, 565.00.

A. ATTORNEY FEES

Dahmes seeks an award of attorney fees under Minn.Stat. § 15.471, subd. 8 (2014) (the Minnesota Equal Access to Justice Act or MEAJA), in the amount of $38, 677.50. Pridgeon Aff. Ex. A. The Commissioner opposes Dahmes' request, arguing that the request was not timely made, that Dahmes' motion “does not meet the evidentiary prerequisites for an award, ” and that the Commissioner's position in the litigation was substantially justified. Obj. Appellant's Mot. 1. We disagree on all points, and award Dahmes the requested attorney fees.

Timeliness.

A party seeking an award under MEAJA must apply “within 30 days of final judgment in the action.” Minn.Stat. § 15.472(b) (2014). We filed findings of fact and conclusions of law in this matter on April 7, 2015, which reversed all but $3, 324.55 of the Commissioner's order, and directed the Commissioner to recompute Dahmes' liability including interest. Findings at 6 & n.2.^[1] The Commissioner did so on April 17, 2015, and on May 4, 2015, Dahmes filed notice with the court that it had no objection to the Commissioner's recomputation. On May 13, 2015, we filed an Order for Judgment that affirmed the Commissioner's order “in the amount of $3, 324.55, plus interest of $742.33 through April 22, 2015, ” stayed entry of judgment for a period of 15 days to allow for post-trial motions, and directed that judgment be entered accordingly. No post-trial motions were filed; judgment was therefore entered 15 days later, that is, on May 28, 2015. Dahmes' application for attorney fees was filed on June 23, 2015-within 30 days of the entry of judgment in this matter.

The Commissioner contends that Dahmes' request under MEAJA is untimely because it was not filed within 30 days of our May 13 Order for Judgment. According to the Commissioner, our May 13 Order for Judgment-rather than the May 28, 2015 judgment itself-“constituted the ‘final judgment' in the action.” Obj. Appellant's Mot. 3. We disagree. Under Minn.Stat. § 271.08, subd. 1 (2014), we must “determine every appeal by written order containing findings of fact and the decision of the tax court.” Under Minn.Stat. § 271.08, subd. 2 (2014), upon the filing of such written order, “judgment shall be entered thereon in the same manner as in the case of an order of the district court.” The statutory scheme clearly calls for two distinct actions: the filing of a written order, followed by the entry of judgment with respect to that order. Our May 13 Order for Judgment directed entry of the final judgment in the action; it was not itself the final judgment in the action.

For her position, the Commissioner relies first on Minn.Stat. § 271.09, subd. 1 (2014), which provides that our decisions “shall be final and conclusive upon all parties to the proceedings as to all matters at issue determined by such decision, ” and Minn. R. Civ. P. 54.01, which defines “judgment” as “the final determination of the rights of the parties in an action or proceeding.” We read section 271.09, subdivision 1, to distinguish proceedings in our court from proceedings in other administrative agencies in which the decision of the fact-finder (such as an administrative law judge) is only advisory to the agency. See, e.g., In re Excess Surplus Status of Blue Cross and Blue Shield of Minnesota, 624 N.W.2d 264, 274 (Minn.2001) (noting that after issuance of the findings and conclusions of an administrative law judge, a deputy commissioner of the Department of Health “was required to make an independent decision based on the record before him”); Matter of Hutchinson, 440 N.W.2d 171, 175 (Minn.App.1989) (noting that the report of an administrative law judge to the Racing Commission “is only a recommendation, and neither binds the parties nor limits the independent factfinding power of the Commission”). Section 271.09, subdivision 1, also confirms Minn.Stat. § 271.01, subd. 5 (2014) (making the tax court “the sole, exclusive, and final authority for the hearing and determination of all questions of law and fact arising under the tax laws of the state”) by making the right of appeal to the tax court “the exclusive remedy for reviewing the action of the commissioner of revenue or the appropriate unit of government respecting any tax, assessment, or other obligation as defined in section 271.01, subdivision 5.” Section 271.09 provides no support for the Commissioner's argument that our May 13 Order for Judgment was the “final judgment in the action” for purposes of MEAJA.

Although conceding that “entry of judgment was stayed for 15 days, ” the Commissioner also contends that “the [May 13] Order for Judgment was effective on filing.” Obj. Appellant's Mot. 3 (citing Minn.Stat. § 271.12 (2014) (providing that our orders “shall take effect immediately upon the filing thereof”)). The question under MEAJA, however, is the date of the “final judgment in the action, ” which commences the period for seeking attorney fees. Even if our May 13 Order for Judgment was “effective on filing” (a proposition with which we do not particularly disagree), it could have accomplished no more than its plain language provided, namely, that judgment be entered 15 days later.

Finally, the Commissioner contends that the period to seek attorney fees under MEAJA commenced with our May 13 Order for Judgment because the May 13 Order for Judgment “was appealable to the Supreme Court upon its filing.” Obj. Appellant's Mot. 3 (citing Express Scripts, Inc. v. Comm'r of Revenue, No. A12-1966, 2013 WL 310642 (Minn. Jan. 18, 2013)). Under Minn.Stat. § 271.10, subd. 2 (2014), a party has 60 days in which to seek review of a “final order” of our court.^[2] In contrast, under MEAJA the time for seeking attorney fees starts with the “final judgment in the action.” Minn.Stat. § 15.472(b). Our May 13 Order for Judgment may have been a “final order, ” but it was not the final judgment itself, the operative date under MEAJA.

Based on the plain meaning of Minn.Stat. § 15.472(b), the last day on which Dahmes could timely apply for attorney fees was June 26, 2015-30 days after the entry of final judgment. Because Dahmes filed its application on June 23, 2015-only 26 days after entry of final judgment-it is timely under MEAJA.

Eligibility.

Relief under MEAJA is limited to, among others, “an unincorporated business, partnership, corporation, association, or organization, having not more than 500 employees at the time the civil action was filed” or “an unincorporated business, partnership, corporation, association, or organization whose annual revenues did not exceed $7, 000, 000 at the time the civil action was filed.” Minn.Stat. § 15.471, subd. 6(a)(1), (2) (2014). The Commissioner contends that Dahmes failed to show that it is a “party” entitled to relief under MEAJA.

Dahmes supports its MEAJA request with an affidavit of Forrest Dahmes, the company's founder and CEO, attesting that Dahmes employed fewer than 500 employees “throughout the periods at issue and up to the present date” and that Dahmes' “annual revenues did not exceed $7 000, 000 when this action was initiated” on June 9, 2010. Dahmes Aff. ¶¶ 2, 3. The Commissioner complains that Mr. Dahmes' affidavit is “legally insufficient” because it “does not meet the best evidence requirement” and “is [an] unsupported,...