United States v. Zak

• Decision Date: 22 October 2021
• Docket Number: CIVIL ACTION NO. 1:18-cv-5774-AT
• Citation: 580 F.Supp.3d 1351
• Parties: UNITED STATES of America, Plaintiff, v. Nancy ZAK, et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

580 F.Supp.3d 1351

UNITED STATES of America, Plaintiff,

v.Nancy ZAK, et al., Defendants.

CIVIL ACTION NO. 1:18-cv-5774-AT

United States District Court, N.D. Georgia, Atlanta Division.

Signed October 22, 2021

ATTORNEYS FOR PLAINTIFF/COUNTER DEFENDANT UNITED STATES: Neeli Ben-David, Office of the United States Attorney, Atlanta, GA, Eric Martin Aberg, Gregory E. Van Hoey, Harris Phillips, James Francis Bresnahan, III, Lauren Darwit, Russell J. Edelstein, Thomas K. Vanaskie, United States Department of Justice, Tax Division, Washington, DC, Richard Gerald Rose, Office of the United States Attorney-Tax Division, Washington, DC.

ATTORNEYS FOR DEFENDANT/COUNTER CLAIMANT CLAUD CLARK III: Robert C. Khayat, Jr., Brian Spielman, The Khayat Law Firm, Atlanta, GA.

ATTORNEYS FOR DEFENDANT ECOVEST CAPITAL, INC.: Amee Frodle, Benjamin John Razi, Kandyce Lyndsey Jayasinghe, Marianna F. Jackson, Matthew V. Miller, Nicholas Pastan, Sean Murphy Akins, Wesline Nikethana Manuelpillai, Covington & Burling LLP, Washington, DC, Elizabeth L. Clack-Freeman, Thomas T. Tate, Andersen, Tate & Carr, P.C., Duluth, GA.

ATTORNEYS FOR DEFENDANTS ALAN N. SOLON, ROBERT M. MCCULLOUGH, RALPH R. TEAL, JR.: Amee Frodle, Benjamin John Razi, Kandyce Lyndsey Jayasinghe, Marianna F. Jackson, Matthew V. Miller, Nicholas Pastan, Sean Murphy Akins, Covington & Burling LLP, Washington, DC, Elizabeth L. Clack-Freeman, Thomas T. Tate, Andersen, Tate & Carr, P.C., Duluth, GA.

ORDER

AMY TOTENBERG, UNITED STATES DISTRICT JUDGE

This matter is before the Court on the Government's Motion to Certify Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(b) [Doc. 317] and Motion to Stay Counterclaim [Doc. 318]. For the following reasons, the Court DENIES both motions.

I. Background

The Government initiated this action on December 18, 2018, nearly three years prior to the entry of this Order. Since that time the parties have filed several motions to dismiss, addressing both the Government's claims and the counterclaim raised by Defendant Claud Clark III.

In the Complaint, the Government alleged that Defendants participated in a "highly structured — and abusive — tax scheme involving the syndication of conservation easement donations." (Compl., Doc. 1 ¶¶ 1–2.) The government alleged that these transactions entailed "sale of grossly overvalued federal tax deductions under the guise of investing in a partnership." (Id. ¶ 2.) Four of the six Defendants — Ecovest Capital, Inc., Alan N. Solon, Robert M. McCullough, and Ralph R. Teal, Jr. — filed an Answer to the Complaint on February 20, 2019. (Doc. 15.) The other two Defendants — Clark and Defendant Nancy Zak — separately moved to dismiss the Complaint. The Court denied Clark's motion and granted Zak's motion in part on December 10, 2019. (Doc. 119.) Clark and Zak both filed Answers shortly thereafter.¹

In his Answer, Clark asserted a counterclaim that the Government improperly disclosed his tax return information in violation of 26 U.S.C. §§ 6103 & 7431. (Doc. 123 at 115–27.) The Government moved to dismiss Clark's counterclaim and the Court granted the Government's motion, dismissing Clark's counterclaim without prejudice. (Doc. 161); (Doc. 202). Clark then filed an Amended Counterclaim and the Government filed another motion to dismiss.² (Doc. 206); (Doc. 208). In its motion to dismiss Clark's Amended Counterclaim, the Government argued that Clark's tax return information was lawfully disclosed when the Government filed the Complaint in the present action. (Doc. 208 at 11.) And, relying on Lampert v. United States , 854 F.2d 335 (9th Cir. 1988), the Government argued that because the Complaint was by that point a matter of public record, the United States Department of Justice's subsequent republication of that same information through the issuance of a press release therefore did not violate § 6103. (Doc. 208 at 11–12.)

The Court denied the Government's motion to dismiss on July 6, 2021. (Order, Doc. 309.) In that Order, the Court emphasized that the Eleventh Circuit has never recognized the Ninth Circuit's "implicit exception" to § 6103 ’s confidentiality requirement for "all tax return information that has become a matter of public record," and that several other Circuits had expressly refused to do so. (Id. at 9, 13.) The Court was more persuaded by the narrower approach taken by the Fourth, Fifth, Seventh, and Tenth Circuits, under which liability under § 6103 depends on the immediate source of the disclosed information rather than its public or non-confidential status. (Id. at 11–12.) The Court also expressed doubts that the Seventh Circuit's rule permitting the subsequent republication of return information contained in a judicial opinion would similarly apply to the republication of return information contained in a complaint that was prepared by the Government's own lawyers. (Id. at 14–15.)

On August 13, 2021, the Government moved to certify the Court's Order for an interlocutory appeal under 28 U.S.C. § 1292(b). (Doc. 317.) In conjunction with that motion, the Government also moved to stay discovery pending the resolution of its 1292(b) motion and, in the event that an appeal were certified, the resolution of the appeal. (Doc. 318.)

II. Legal Standard

To be granted permission for an interlocutory appeal of a nonfinal order pursuant to 28 U.S.C. § 1292(b), a party must demonstrate that there is "a controlling question of law as to which there is substantial ground for difference of opinion" and that an immediate appeal will "materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b) ; see McFarlin v. Conseco Servs., LLC , 381 F.3d 1251, 1264 (11th Cir. 2004). Certification for immediate appeal of a nonfinal order under § 1292(b) is an extraordinary measure, which is permitted only in exceptional circumstances. McFarlin , 381 F.3d at 1256. Interlocutory appeals under § 1292(b) "were intended, and should be reserved, for situations in which the court of appeals can rule on a pure, controlling question of law without having to delve beyond the surface of the record in order to determine the facts." Id. at 1259. Indeed, the Supreme Court has instructed that an appeal gives the higher court "a power of review, not one of intervention." Cohen v. Beneficial Indus. Loan Corp. , 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Section 1292(b) disallows appeals "from any decision which is tentative, informal or incomplete" or on any matter that "remains open, unfinished or inconclusive." Id.

In McFarlin , the Eleventh Circuit explained that a "controlling question of law" as contemplated by § 1292(b) is "a question of the meaning of a statutory or constitutional provision, regulation, or common law doctrine." McFarlin , 381 F.3d at 1258 (citing Ahrenholz v. Bd. of Trs. of the Univ. of Ill. , 219 F.3d 674, 676 (7th Cir. 2000) ). The court opined,

The term ‘question of law’ does not mean the application of settled law to fact. It does not mean any question the decision of which requires rooting through the record in search of the facts or of genuine issues of fact. Instead, what the framers of § 1292(b) had in mind is more of an abstract legal issue or what might be called one of ‘pure’ law, matters the court of appeals ‘can decide quickly and cleanly without having to study the record.’

Id. (internal citations omitted) (citing Ahrenholz , 219 F.3d at 676–77 ). Accordingly, "[t]he antithesis of a proper § 1292(b) appeal is one that turns on ... whether the district court properly applied settled law to the facts or evidence of a particular case." Id. at 1259.

With regard to the requirement that there be a "substantial ground for difference of opinion" to warrant an interlocutory appeal, the Eleventh Circuit has held that a question of law as to which the appeals court is in "complete and unequivocal" agreement with the district court is not a proper one for § 1292(b) review. Id. (quoting Burrell v. Bd. of Trs. of Ga. Military Coll. , 970 F.2d 785, 788–89 (11th Cir. 1992) ). A "substantial ground for difference of opinion" may also exist where "the issue is difficult and of first impression, a difference of opinion as to the issue exists within the controlling circuit, or the circuits are split on the issue." U.S., ex rel. Powell v. Am. InterContinental Univ., Inc. , 756 F. Supp. 2d 1374, 1378–79 (N.D. Ga. 2010) (citing cases). "Neither the mere lack of authority on the issue nor the claim that the district court's ruling is incorrect constitutes a substantial ground for difference of opinion." Id. at 1379 (citing In re Scientific-Atlanta, Inc. Sec. Litig. , No. 1:01-cv-1950, 2003 WL 25740734, at *1 (N.D. Ga. Apr. 15, 2003) ).

In determining whether an immediate appeal will "materially advance the ultimate termination of the litigation," the Court considers the extent to which additional time and expense may be saved by the appeal and whether resolution of a controlling legal question would serve to avoid a trial or otherwise substantially shorten the litigation. McFarlin , 381 F.3d at 1259 ; see Dimuccio v. D'Ambra , 779 F. Supp. 1318, 1324 (M.D. Fla. 1991).

III. Discussion

In its § 1292(b) motion, the Government seeks to certify the following question for appeal:

Whether 26 U.S.C. § 6103 prohibits publication by the government of taxpayer information that has already been lawfully and publicly disclosed by the government in a judicial proceeding pertaining to tax administration?

(U.S. Mot. to Certify, Doc. 317-1 at 2.) To determine whether the Government has satisfied the requirements to certify this question for an interlocutory appeal, the Court will begin by addressing whether the Government has raised a controlling question of law that presents a substantial ground for difference of opinion. Next, the Court will consider whether an immediate appeal would materially advance the litigation.

A. Whether the Question Presented Is a Controlling Question of Law that Presents a Substantial Ground for...