Harper v. Comm'r of Internal Revenue

• Decision Date: 29 October 1992
• Docket Number: No. 23637–89.,23637–89.
• Citation: 99 T.C. 533,99 T.C. No. 28
• Parties: Wally HARPER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

99 T.C. 533

99 T.C. No. 28

Wally HARPER, Petitioner,

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 23637–89.

United States Tax Court.

Oct. 29, 1992.

Herbert G. Feinson, for petitioner.

Marcie B. Harrison, for respondent.

BEGHE, Judge:

Respondent determined the following deficiency in and additions to petitioner's Federal income tax for the taxable year 1983:

+------------------+
                ¦¦Additions to Tax ¦
                +------------------+
                

           Sec.       Sec.       Sec
                Deficiency 6651(A)(1) 6653(A)(1) 6653(a)(2)
                $12,001    $1,200     $665       50% of the interest due on $12,001
                

This case is before us on respondent's motions to dismiss under Rule 123(b) ¹ for petitioner's failure properly to prosecute and for monetary sanctions under section 6673(a) against petitioner and petitioner's attorney, Herbert G. Feinson.² On the basis of the facts and reasons set forth below, we will grant respondent's motions to dismiss and for monetary sanctions against Mr. Feinson, but will not impose any monetary sanction on petitioner.

Petitioner was a resident of New York City at the time he filed his petition.

FINDINGS OF FACT

Petitioner is a composer who has written music for Broadway shows. On September 26, 1989, petitioner, through Mr. Feinson, his attorney, filed a petition with this Court seeking redetermination of respondent's determination of a deficiency in petitioner's 1983 Federal income tax. Respondent's answer was filed on November 14, 1989. On July 3, 1990, the Court served notice on the parties that the case was calendared for trial at the Court's New York City trial session beginning December 3, 1990. Attached to the notice was the Court's standing pretrial order. At the calendar call on December 3, 1990, no one appeared on petitioner's behalf. Respondent moved to dismiss under Rule 123(b) for petitioner's failure properly to prosecute. On December 31, 1990, the Court granted respondent's motion and entered decision for respondent.

On February 4, 1991, petitioner moved to vacate the Court's order of dismissal. Over respondent's objection, the Court granted petitioner's motion on the ground that the failure to appear at the calendar call was due to Mr. Feinson's oversight,³ and that petitioner should not be penalized thereby. The Court then returned the case to the general docket.

On June 6, 1991, the case was recalendared for the Court's New York City trial session beginning on November 12, 1991. The Court again served its standing pretrial order, which requires the parties to exchange facts, documents, and other data necessary to expedite the case for trial or settlement, and to stipulate facts to the maximum extent possible, and that each party prepare a trial memorandum substantially in the form prescribed and submit it to the Court and the opposing party not less than 15 days before the first day of the trial session.

On July 15, 1991, respondent served petitioner, through Mr. Feinson, with a request for production of documents pursuant to Rule 72. Respondent requested that petitioner produce documents for inspection and copying on, or before, September 1, 1991 at District Counsel's office. On August 23, 1991, Mr. Feinson sent respondent a facsimile letter stating that he would not produce the documents as requested, but that respondent's counsel could “roam through the entire file” of some 2,000 documents in his office. In response to Mr. Feinson's refusal to comply with respondent's request, respondent filed a motion under Rules 72(b) and 104(b) to compel production of documents, which we granted on September 17, 1991.

In accordance with our order to compel, Mr. Feinson appeared at the District Counsel's office at the appointed date and time (October 7, 1991, at 9 a.m.), but would not let respondent's counsel examine or copy more than one document at a time. As a result, respondent's counsel was able to copy only about 50 documents in 3 days. Moreover, some of the documents Mr. Feinson produced during this copying session were for other taxable years or had already been seen and used by respondent as substantiating evidence of deductions claimed on petitioner's 1983 Federal income tax return that respondent had allowed prior to determining the deficiency shown in the statutory notice.

On October 24, 1991, pursuant to the Court's standing pretrial order, respondent prepared and timely served her trial memorandum on the Court and petitioner's counsel. Respondent's trial memorandum described the substantive issues in the case as (1) whether petitioner's musical copyright royalty income should be treated as ordinary income or capital gain, (2) whether petitioner had received dividend income, (3) whether petitioner was entitled to various business expense deductions and itemized deductions, and (4) whether petitioner was liable for additions to tax. The issue with respect to the deductions was substantiation.

Respondent's trial memorandum also indicated that respondent's counsel expected to call petitioner as a witness. Neither petitioner nor Mr. Feinson submitted a trial memorandum. Nor did they respond to respondent's proposed stipulations of fact, which included only documents provided by Mr. Feinson at the 3–day copying session.

At the calendar call on November 12, 1991, Mr. Feinson filed a motion for summary judgment under Rule 121 on the grounds that respondent's notice of deficiency was “null and void” because it was not personally signed by the Commissioner of Internal Revenue, and that the 3–year period of limitations had expired because the extension (Form 872–A), which Mr. Feinson had executed on petitioner's behalf, was invalid as not having been personally signed by the Secretary of the Treasury. Mr. Feinson's motion for summary judgment also stated that “The principal issue is a question of fact.”

At the calendar call, respondent moved for sanctions under section 6673(a)(1) against petitioner on the grounds that he had instituted and maintained the proceedings primarily for delay and that his positions were frivolous and groundless. Respondent's motion paper set out the facts outlined above, but made no reference to Mr. Feinson. Inasmuch as the delays in this case appeared to have been caused by Mr. Feinson, we inquired whether respondent was also seeking sanctions against him under section 6673(a)(2). Respondent replied that she was requesting sanctions against both petitioner and Mr. Feinson. Mr. Feinson then filed a motion in opposition stating that petitioner had complied with respondent's discovery request and that he had complied with our order to compel.

At the conclusion of the calendar call on November 12, 1991, we arranged for a conference call between the Court and the parties to be held on November 15, 1991, and ordered Mr. Feinson to be prepared for that conference. We again ordered Mr. Feinson to submit a trial memorandum. Mr. Feinson stated in open court that he would be prepared, that he would submit a trial memorandum, and that he would produce petitioner, Wally Harper, as a witness at the trial.

On November 14, 1991, respondent filed a memorandum of law in support of her motion for sanctions. In the memorandum, respondent addressed the standards for imposing sanctions against petitioner under section 6673(a)(1) and against Mr. Feinson under section 6673(a)(2). On the same date, Mr. Feinson filed a “Reply to the Oral Arguments” and a memorandum, both of which set forth arguments identical to those in his earlier memorandum in support of his motion for summary judgment. Neither of these documents was a trial memorandum.

On November 15, 1991, following the conference call, we issued an order denying petitioner's motion for summary judgment, held respondent's motion for sanctions in abeyance pending final disposition of the case, set a date and time certain for trial (November 22, 1991, at 9 a.m.), ordered petitioner to produce for copying and inspection at the office of District Counsel (on November 19, 1991, at 9 a.m.) all documents that he intended to introduce at trial, ordered the parties to stipulate facts to the maximum extent possible, and ordered that petitioner Wally Harper be present in the courtroom at the scheduled trial. There is no indication in the record that Mr. Feinson appeared at District Counsel's office with the documents for copying, as we had ordered him to do.

At the recall of the case on the scheduled trial date, respondent was prepared to try the case. However, Mr. Feinson was not prepared for trial and, contrary to our order of November 15, 1991, petitioner was not present in the courtroom. We asked Mr. Feinson why petitioner was not present. Mr. Feinson replied that he had not attempted to contact petitioner until the previous night, and was unable to reach petitioner then because he was out of town. We then reminded Mr. Feinson of our order requiring petitioner to be present. Mr. Feinson replied that the order was “absolutely illegal.”

Respondent then moved to dismiss the case under Rule 123(b) for petitioner's failure properly to prosecute. We ordered Mr. Feinson to respond in writing to respondent's motion to dismiss and ordered respondent to submit a supplement to her motion for sanctions setting forth an accounting of the additional costs, expenses, and reasonable attorney's fees incurred to date as a result of the delays caused by Mr. Feinson. We also set a due date for petitioner's response to respondent's supplement.

On December 5, 1991, respondent filed the supplement to her motion for section 6673(a) sanctions. In that document, respondent's counsel, Marcie B. Harrison, states that from February 13, 1991, to December 4, 1991, she and her supervisor, Assistant District Counsel Paulette Segal, spent an estimated 98 additional attorney hours because of Mr. Feinson's misconduct. The statement contains an itemized list of additional tasks that respondent's counsel and her supervisor were required to perform in this case and the...