New York Football Giants, Inc. v. C.I.R.

Citation349 F.3d 102
Decision Date04 November 2003
Docket NumberNo. 02-4392.,02-4392.
PartiesNEW YORK FOOTBALL GIANTS, INC., Appellant v. COMMISSIONER OF INTERNAL REVENUE.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Michael A. Guariglia [Argued], Margaret C. Wilson, McCarter & English, LLP, Newark, NJ, Counsel for Appellant.

Eileen J. O'Connor, Kenneth L. Greene, Bridget M. Rowan [Argued], Tax Division, Department of Justice, Washington, D.C., Counsel for Appellee.

Before: McKEE, SMITH, Circuit Judges, and SCHILLER,* District Judge.

OPINION OF THE COURT

SMITH, Circuit Judge.

This case presents a question of our jurisdiction to review orders of the Tax Court under 26 U.S.C. § 7482(a)(1). Appellant New York Football Giants, Inc. (the "Giants") appeals from an order of the Tax Court dismissing its petition with respect to some, but not all, of the tax years at issue. The Tax Court determined that it lacked jurisdiction over the Giants' petition with respect to those years. The Tax Court did not make, nor was it asked to make, a determination of finality under Fed.R.Civ.P. 54(b) with respect to any particular tax year. We conclude that the Tax Court's order is not a final decision and that we lack jurisdiction over the Giants' appeal under section 7482(a)(1). We therefore do not reach the Giants' argument that the Tax Court had jurisdiction over its petition.

I.

The Giants own and operate a professional football franchise in the National Football League ("NFL"). In 1993, the Giants elected to be treated as an S corporation under 26 U.S.C. (I.R.C.) §§ 1361 and 1362. The Internal Revenue Service ("IRS") audited the Giants and determined that the Giants owed taxes on built-in gains1 accruing to it from the expansion of the NFL in 1993. The IRS issued a Notice of Deficiency to the Giants on May 18, 2000 for Fiscal Years Ending ("FYEs") 1996, 1997, and 1998. The Giants filed a petition in the United States Tax Court challenging the Notice of Deficiency for each of those years. In addition to disputing the recognition of built-in gains, the Giants alleged that, as to FYE 1997, the three-year statute of limitations under I.R.C. § 6501 had run.

The IRS conceded that the statute of limitations under I.R.C. § 6501 had expired. However, rather than accept judgment in favor of the Giants as to FYE 1997, the IRS moved to dismiss the Giants' petition with respect to FYE 1996 and 1997 for lack of jurisdiction. The IRS argued that its own Notice of Deficiency as to those years was invalid because the built-in gains tax liability had to be determined in a unified audit proceeding under I.R.C. §§ 6241-45. Under the unified procedures, the IRS must issue notice of final administrative adjustment before judicial review may be had in the Tax Court. I.R.C. §§ 6226, 6244. The Giants opposed the IRS's motion and cross-moved for entry of judgment as to FYE 1997.

The Tax Court agreed with the IRS that the built-in gains tax liability for FYEs 1996 and 1997 were subject to unified audit procedures. New York Football Giants, Inc. v. Comm'r, 117 T.C. 152, 2001 WL 1335284 (2001). Because the IRS had not issued a notice of final administrative adjustment, the Tax Court entered an order dismissing the Giants' petition with respect to FYEs 1996 and 1997. However, the petition with respect to FYE 1998 was not affected because the statutes establishing the unified procedures were repealed, effective for tax years beginning after Dec. 31, 1996, by the Small Business Job Protection Act of 1996, Pub.L. No. 104-188 § 1307(c)(1), 110 Stat. 1781. Thus, the Giants' petition with respect to FYE 1998 is presently before the Tax Court.

The Tax Court denied the Giants' motion to reconsider the partial dismissal. Thereafter, the Giants moved the Tax Court to certify the partial dismissal for interlocutory appeal, reserving its contention that the dismissal was a final and immediately appealable judgment. The Tax Court denied the Giants' motion, concluding that "immediate appeal of the issues in this case will not materially advance the ultimate termination of this case." New York Football Giants, Inc. v. Comm'r, 85 T.C.M. (CCH) 810 (2003).

The Giants now appeal the partial dismissal of their petition to this court. The Giants argue that the built-in gains tax liability for FYEs 1996 and 1997 is not subject to the unified audit procedures. Instead, the Giants maintain that these liabilities can only be determined through a notice of deficiency and that the Giants properly challenged the IRS's Notice of Deficiency in their petition.

Although not directly implicated in this appeal, a primary concern of the parties is the statute of limitations issue. During the audit, the IRS requested that the Giants and the Giants' shareholders execute separate agreements extending the limitations periods for the assessment of taxes for FYE 1997. Although the shareholders' representative agreed to an extension, the Giants refused to execute an agreement extending the statute of limitations. The IRS takes the position that, under the unified audit procedures, the extension agreed to by the shareholders extended the statute of limitations for both the shareholders and the Giants. If, however, the unified procedures do not apply and jurisdiction over the Giants' petition is proper, the Giants believe that they are entitled to judgment in their favor based on the running of the statute of limitations.

II.

Appellate jurisdiction over Tax Court orders is established by I.R.C. 7482(a)(1), which provides: "The United States Courts of Appeals ... shall have exclusive jurisdiction to review the decisions of the Tax Court ... in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury...." Jurisdiction under section 7482(a)(1), like our jurisdiction over district court decisions under 28 U.S.C. § 1291, extends only to a "final decision" of the tax court. Ryan v. Comm'r, 680 F.2d 324, 326 (3d Cir.1982) (holding that denial of summary judgment motion is not final and appealable under section 7482(a)(1)); Estate of Smith v. Comm'r, 638 F.2d 665, 668 (3d Cir.1981) (holding that order denying intervention was final and appealable because, as in a district court proceeding, "[n]othing further would remain to be done on her petition and recourse, if any, would be through appeal").

A "final decision" generally is one that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978). Finality generally requires that a judgment dispose of all of the claims in a given case before an appeal may be taken. E.g., Berckeley Inv. Group, Ltd. v. Colkitt, 259 F.3d 135, 140 (3d Cir.2001). This requirement reflects a long-recognized policy against "piecemeal litigation," i.e., "[t]he case is not to be sent up in fragments." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945); see also Coopers & Lybrand, 437 U.S. at 471, 98 S.Ct. 2454 ("The finality requirement in § 1291 evinces a legislative judgment that [r]estricting appellate review to `final decisions' prevents the debilitating effect on judicial administration caused by piecemeal appeal disposition of what is, in practical consequence, but a single controversy." (internal quotations omitted)).

In civil cases before the district courts, Federal Rule of Civil Procedure 54(b) relaxes the finality requirement "to avoid the possible injustice of a delay in judgment of a distinctly separate claim to await adjudication of the entire case." Fed.R.Civ.P. 54(b) advisory committee's note; see Berckeley, 259 F.3d at 140. Rule 54(b) provides:

When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

Absent a Rule 54(b) determination, a district court decision dismissing some, but not all, of the claims before the court is not a "final" order that can be appealed. E.g., Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1208-09 (3d Cir.1991).

Rule 54(b) reflects a considered policy that the trial court is often in the best position to assess the finality of its own judgments and should therefore be relied on as a "dispatcher." Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 435, 76 S.Ct. 895, 100 L.Ed. 1297 (1956) ("To meet the demonstrated need for flexibility, the District Court is used as a `dispatcher.'"). Discretion to determine whether an immediate appeal should be allowed is, "with good reason, vested by the rule primarily in the discretion of the District Court as the one most likely to be familiar with the case and with any justifiable reasons for delay." Id. at 437, 76 S.Ct. 895.

The question raised in this appeal is whether a court of appeals has jurisdiction to review an order of the Tax Court dismissing some, but not all, of the disputed years in a petition. Although this is a question of first impression in this circuit, it has been addressed by several of our sister circuits, resulting in three distinct approaches. The D.C. Circuit permits appellate review of orders that finally dispose of any particular claims....

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