Meredith Corp. v. United States

• Court: U.S. District Court — Southern District of Iowa
• Writing for the Court: ROBERT W. PRATT, Judge
• Citation: Meredith Corp. v. United States, 447 F.Supp.3d 805 (S.D. Iowa 2020)
• Decision Date: 19 March 2020
• Docket Number: 4:17-cv-00385
• Parties: MEREDITH CORPORATION, Plaintiff, v. UNITED STATES of America, Defendant.

447 F.Supp.3d 805

MEREDITH CORPORATION, Plaintiff,

v.UNITED STATES of America, Defendant.

4:17-cv-00385

United States District Court, S.D. Iowa, Central Division.

Signed March 19, 2020

Stephen H. Locher, Kelsey J. Knowles, Belin McCormick, P.C., Des Moines, IA, Caitlin Tharp, Lisa M. Zarlenga, Steptoe & Johnson, Robert J. Kovacev, Norton Rose Fulbright US LLP, Washington, DC, for Plaintiff.

Gregory E. Van Hoey, Martin Morris Shoemaker, U.S. Dept. of Justice Civil Tax Division, Washington, DC, for Defendant.

ORDER ON BENCH TRIAL

ROBERT W. PRATT, Judge Plaintiff Meredith Corporation filed this action against the United States under 26 U.S.C. § 7422 and seeks recovery of certain taxes paid for 2006 through 2012. ECF No. 1. After denying Plaintiff's Motion for Summary Judgment, ECF No. 55, the Court held a bench trial from October 21–23, 2019. The parties filed proposed findings of fact, proposed conclusions of law, and briefing with respect to an evidentiary issue on November 21. ECF Nos. 100–03. The parties then made final arguments on December 5. ECF No. 104. The case is fully submitted.

I. FINDINGS OF FACT

Any action tried without a jury requires the Court to "find the facts specially and state its conclusions of law separately." Fed. R. Civ. P. 52(a). In performing the related task of determining the credibility of a given witness and the weight to be accorded his or her testimony, the Court has taken into consideration the following:

the witness's intelligence; the opportunity the witness had to see or hear the things testified about; a witness's memory, knowledge, education, and experience; any reasons a witness might have for testifying a certain way; how a witness acted while testifying; whether a witness said something different at another time; whether a witness's testimony sounded reasonable; and whether or to what extent a witness's testimony is consistent with other evidence [the Court] believe[s].

Model Civ. Jury Instr. 8th Cir. 3.03 (Comm. on Model Jury Instr. for the 8th Cir. 2019).

The parties stipulated to many facts. See ECF No. 60. The Court's factual findings include such stipulated facts, findings as to the credibility of the witnesses, findings based on admissible witness testimony, and additional findings based on admitted evidence.

A. Findings with Respect to Individuals and Entities

The Court finds the following with respect to individuals and business entities who were the subject of admitted testimony on which the Court relied:

• Plaintiff is a publicly held media and marketing services company, headquartered in Des Moines, Iowa, since its 1902 founding. ECF No. 60 ¶ 3. Plaintiff is organized as a corporation under Iowa law with its principal place of business at 1716 Locust Avenue in Des Moines. Id. ¶ 4.

• Plaintiff is one of the United States' leading magazine publishers. Id. ¶ 3. It publishes more than twenty subscription magazines—including Better Homes & Gardens—and nearly 140 special interest publications. Id. ¶ 5. More than 127 million people read one of Plaintiff's magazines each year. Id. ¶ 6.

• Brad Waggoner works for LSC Communications, a printing company. ECF No. 98 at 6:4–8. LSC formed in 2016 as a spinoff of R.R. Donnelly & Sons Co. (RRD), another printing company that printed magazines for Plaintiff. Id. at 6:12–16. Waggoner appeared pursuant to a subpoena, which the Court finds boosted his credibility. Id. at 5:24–6:1. The Court found him very credible with respect to how RRD treated its relationship with Plaintiff. To the extent Waggoner strayed beyond his expertise to address matters of law, the Court found him less so.

• Kevin Turner also works at LSC. Id. at 85:22–24. Since 1995, he has worked mainly on Plaintiff's account with RRD or LSC. Id. at 86:24–87:6. During the events at issue, Waggoner managed Turner, and Turner managed no one. Id. at 107:23–25. The Court found Turner, who also appeared pursuant to a subpoena, id. at 85:12–14, credible with respect to Plaintiff's relationship with RRD. As with Waggoner, to the extent Turner strayed beyond his area of expertise to address matters of law or the views of other RRD departments, the Court found such testimony less credible.

• Chad Schumacher is Plaintiff's executive director of production. ECF No. 97 at 24:9–13. He has worked for Plaintiff for more than eighteen years and has worked in his current job since 2011. Id. at 24:23–24. He is responsible for production of Plaintiff's magazines and, among other things. Id. at 24:16–18. Before his current job, he analyzed printers' bids for Plaintiff's business, among other things. Id. at 25:2–7. Before joining Plaintiff in 2001, he worked for RRD on customer invoices, including Plaintiff's. Id. at 25:2–26:6. The Court found Schumacher generally credible with respect to his perception of the relationship between Plaintiff and RRD. However, the Court did consider that (1) Schumacher had a substantial interest in providing favorable testimony for Plaintiff, his employer; (2) he did not work on billing for RRD during the relevant period; and (3) he had no special training in tax law or accounting.

• Joseph Kohler is Plaintiff's quality director of production. ECF No. 98 at 171:14. He usually works out of Des Moines, id. at 171:12, but also has visited fourteen printing plants across the country during inspections for Plaintiff. Id. at 190:20–191:19. He has worked in the printing industry since 1985. Id. at 174:9. He has worked for Plaintiff since 2004. Id. at 171:20–172:22. Before that, he worked as a quality analyst for RRD and, before that, for Meredith/Burda, Plaintiff's prior printing unit that it sold to RRD in 1991. Id. at 172:24–173:25. The Court found him to be extremely credible with respect to the printing industry and the work he does for Plaintiff.

• Todd Nielsen is Plaintiff's director of paper purchasing. ECF No. 97 at 229:14–18. He negotiates contracts with paper mills and procures paper for Plaintiff's publications. He has had that job for three years. Id. at 230:4. Prior to that, he was the senior paper purchasing manager for eleven years. Id. at 230:8–9. Before that, he worked in various positions—including one in the paper warehouse—at RRD. Id. at 230:23–231:6. The Court found Nielsen credible with respect to Plaintiff's customs and intent in purchasing paper. The Court, by contrast, found him less credible on legal or accounting matters when they strayed beyond his knowledge and expertise.

• Raymond Prince was the case's only expert witness. ECF No. 60 ¶ 183. Prince has worked in the printing industry for sixty years and is an expert in its processes, customs, standards, and practices. Id. He was qualified as an expert by knowledge, skill, experience, training, or education. Id. ¶ 184. In a notable wrinkle, Prince served as the Government's expert witness in ADVO, Inc. v. Comm'r , 141 T.C. 298 (2013), which involved the same manufacturing tax deduction as this case. ECF No. 60 ¶ 185. In ADVO , he testified that the printers exerted almost exclusive control over the printing process. ECF No. 90-7 at 34. Although Prince's credibility may be impacted here slightly because Plaintiff retained him, such is the case with almost all expert witnesses. The Court also found his ADVO experience helpful. Furthermore, the Court found Prince's testimony credible with respect to printing industry norms.

• Christine Maki has been the head of RRD's tax department since 2008 and is familiar with RRD's tax records and recordkeeping practices. ECF No. 60 ¶ 305. She also supervised the company's communication with the Internal Revenue Service (IRS), including a 2009 letter concerning RRD's § 199 deductions. Id. ¶ 308. Maki testified by deposition, so the Court could not observe her demeanor. Furthermore, the Court found Maki appeared less credible when discussing the tax work of departments in other RRD offices because she appeared to lack first-hand knowledge of some events. The Court found she otherwise appeared credible, considering her testimony's format.

• Doris Ann Gephart retired as a customer service representative at LSC in September 2018. ECF No. 72 at 13:7–8. Before that, she held the same job at RRD. Id. at 14:14–15. From 2007 until 2018, she worked with Plaintiff. Id. at 18:1–5. Her office was at RRD's plant in Mattoon, Illinois, and she went into the printing area often. Id. at 72:16–73:8. She spoke with her counterpart in Plaintiff's office several times a day. Id. at 20:14–18. Gephart also testified by deposition so the Court was not able to assess her credibility in person. Nevertheless, the Court found her credible on matters within her purview, considering her testimony's format.

• John Beard works for Plaintiff as a director of production who mainly oversees Better Homes & Gardens, among other publications. ECF No. 97 at 142:9–143:5. During the years at issue, he worked with advertisers, editorial staff, and printers to help shape the appearance of magazines. Id. at 143:11–25. He has worked for Plaintiff since 2002. Id. at 144:19. Before that, he worked for RRD as a customer account manager on Better Homes & Gardens. Id. at 144:21–23. The Court found him credible with respect to matters under his purview while working for Plaintiff, with the caveat that, like his colleagues, he testified in a case in which his employer stood to benefit. The Court found Beard less credible with respect to his experience at RRD because his time there did not overlap with the tax years at issue.

• Charles Howell is Plaintiff's senior vice president for strategic sourcing, production, and operations. ECF No. 98 at 124:16–19. He has worked for Plaintiff since 2001. Id. at 126:8–9. In 2006, he started Plaintiff's strategic sourcing group, which involved trying to lower the price of contracts with both printers and paper vendors. Id. at 126:20–127:12. In 2011, he also began working on production operations, which included working with the digital files used to print Plaintiff's publications. Id.

...