Dealing with the Shutdown When You Have an Impending Calendar Call: Take Me Back to 2013

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We welcome Professor Caleb Smith who has decided to do something productive at a time when productivity does not seem to be the watchword of our politicians. I wrote a post about Tax Court calendars before and after a government shutdown in the early days of our blog. What happened in 2013 might also give you some perspective on what to expect now when the shutdown ceases. Keith

It probably comes as no shock that, in the midst of the government shutdown the Tax Court did not issue any designated orders during the week of December 31 – January 4. So, because I apparently don’t handle having free-time well, I looked to orders of the past to help with this (not quite unprecedented) period of Tax Court history. In particular, I wanted to look into orders that dealt with government shutdowns.

The last government shutdown (of a lasting duration) was in 2013. (For a list of all the government shutdowns since 1976, check out this helpful PBS post.) The most natural consequence of a shutdown (and the break in communication between parties) is that additional time is needed -either on deadlines that have previously been established (see T.C. Rule 25(c)), or for the trial itself (see T.C. Rule 133). Because I happen to have a calendar call that is still technically set for February 4, 2019 I was more interested in how the Court had previously dealt with motions for continuance for the trial. As noted on the Tax Court website I should learn by January 19 whether the calendar call will actually take place, but I’d rather not wait until then to begin planning.

In my research of motions for a continuance and referenced the government shutdown, I found six orders from three Tax Court judges. Although there are some general requirements to T.C. Rule 133 that any motion for continuance should wrestle with (addressed later), the orders demonstrate more than anything that, in these sorts of discretionary matters, different judges have different preferences. Accordingly, I have broken up the orders by the issuing judge.

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Judicial Approach Number One (Former Judge Kroupa): “Take Two Aspirin and Call Me If You Still Can’t Figure It Out”

The 2013 shutdown lasted 16 days from October 1 to the October 17. The 2013 Salt Lake City trial session was set for November 4. In my experience, the month before trial is set is often the month things actually start getting done, so it is understandable that the parties may not be prepared for trial with the critical period of time effectively cut in half. The IRS appears to say as much in its motion in two separate Salt Lake City cases (Docket 24802-12 and Docket 16322-12): “we haven’t been able to resolve or narrow the issues over the last few weeks because we were locked out of our offices, so please give us more time.”

To this, Judge Kroupa says: “I encourage you to try to settle or narrow the issues for trial. So I’m holding your continuance motion in abeyance until calendar call where you can give an update. And, because I’m serious about encouraging you to settle or narrow the issues, at calendar you will also have to actually discuss the efforts you’ve made to settle or narrow the issues.”

This approach either reflects stubborn optimism or stern stewardship over churning through cases on the Tax Court docket. In either case, the result was the same: for both cases, continuance was granted at trial, and a stipulated decision entered in August of the following year.

Judicial Approach Number Two (Judge Holmes): “Take Two Aspirins and Be Prepared to Submit Status Reports”

The approach taken by Judge Holmes (Docket 10600-12 and Docket 1659-13) was not significantly different from Judge Kroupa’s. Essentially, they each ended in the parties showing up to trial and orally requesting a continuance (which was subsequently granted).

In the Villegas case, the motion for continuance wasn’t even made until the calendar call on October 21, so there really wasn’t much of another option for Judge Holmes. What is striking to me is that Tax Court didn’t cancel the calendar when the shutdown continued within a week of it (as stated earlier, that will likely not be the case this year).

In the other case (Mid City Cannabis Club), the trial was not actually set until January 27, 2014 (i.e. with more time than that “magical final month” still remaining), but the parties were both nervous because, although they may settle, they were confident they wouldn’t be ready for trial. Although Judge Holmes assures the parties that the case will be put on “status-report track” if it doesn’t settle by calendar, he denies the continuance request until then.

 

Again, denying (or holding in abeyance, like Judge Kroupa) a continuance motion until the trial date is perhaps a way to keep parties working diligently towards resolution. But, also again, the ultimate result is generally the same: the Mid City Cannabis case was continued at trial and a stipulated decision was reached in the summer of 2014 (this time July).

Judicial Approach Number Three (Judge Wherry): “Sure, I’ll Grant the Continuance: We’re in Los Angeles All the Time Anyway”

Only the retired Judge Wherry gives the immediate relief (i.e. granting of the continuance motion prior to trial) that the parties requested. Both of the parties (in both of the orders) simply say they need more time because of issues relating to the shutdown, and that appears to be enough.

 

It should be noted, however, that both of the orders (Docket 23698-12, and Docket 145-11), concern cases on the Los Angeles calendar set for December 9, 2013. Of the four cases that Judges Kroupa and Holmes granted continuances for, only one ended up having to go to trial. And that trial took place in… Los Angeles.

Although it goes unstated in the order, the Tax Court simply comes to L.A. more frequently than it does to places like Salt Lake City. Accordingly, by granting a continuance the Court could simply allow the parties to regroup and come back to the table five months later during the May calendar call. Perhaps things would settle by then (as they did in the Moore case, during that “magical” pre-trial month). Or perhaps they would simply have the trial at that later date (as they did in the Coastal Heart Medical Group case). Either way, the efficiency concerns (that the parties will be at loggerheads, and the case sit on the docket for almost another year) don’t present themselves as starkly in the bigger cities as they do in the smaller.

Learning From the Past and Preparing for the Future: Crafting Your Rule 133 Motion

So what can be gleaned from these six orders (four of which come from judges that no longer are on the Tax Court)? In spite of my preliminary take-away (“different tax court judges deal with these things in their own way”) there are some commonalities, and, dare I say, some lessons to be learned from the orders.

Lesson One: Make the judge aware of your need for a continuance in advance of the trial date, rather than just assuming that they will “get it” that you need one because of the shutdown. The fact that (most of) the continuances weren’t automatically granted in the above cases is evidence that the Court expects you to work things out as much as possible even in limited timeframes. Which leads to the second lesson:

Lesson Two: Give reasons why granting the continuance won’t significantly hinder (or may actually help) the efficiency of the court. If both parties were in the process of working out a settlement (that was thwarted primarily because of a breakdown in communications caused by the shutdown) that seems a pretty good reason to give additional time to work things out and may avoid a trial that was never needed. Similarly, it doesn’t do anyone any favors (and makes everyone look bad) to show up for trial when the issues still aren’t well defined. But you have to be prepared to explain why it is the shutdown “caused” these issues to remain ill-defined or the settlement to remain out of reach. Perhaps there were meetings or document exchanges that had to be cancelled and, if only the shutdown wouldn’t have occurred, the case would be much clearer for all involved. Specificity (rather than just saying “we could use more time to define the issues… even though the petition was filed almost a year ago”) is key.

Lesson Three: Provide the court with a plan (specifically, deadlines) to show you will continue to diligently work on the case. The trial date is, in some ways, just a helpful deadline for the Court to keep parties moving towards settlement. If Tax Court isn’t coming to your town again in the near future, asking for continuance may appear to be an indefinite hold on having any accountability. If Tax Court is coming to town again in the not-so-distant future, you may suggest that it be calendared at that date. Of course, since not every location has that luxury, proposing to be put on the “status report track” may be the best you can do. Four of the six cases discussed above settled without needing to go to trial after the continuance was granted. The two that didn’t settle were able to get calendared within roughly half-a-year. If at all possible, you want to be able to demonstrate a similar likely outcome with your case.

Lesson Four: Detail why you are not dilatory in requesting the continuance at this late date. This lesson is less from the orders and more from the rule itself: namely, that a request for a continuance hearing within 30 days of the calendar/trial that it relates to will ordinarily “be deemed dilatory and will be denied unless the ground therefor arose during that period or there was good reason for not making the motion sooner.” The general rule is that the closer to the trial date you make the continuance motion the less likely it is to succeed unless (1) the reason for the motion only just arose, or (2) there is some other good reason for waiting. Of course, if your calendar date is within 30 days of the shutdown you can argue the reason for the motion “arose during that period”, but you will still want to provide other good reasons why it couldn’t be made sooner. One reason may well be logistics: every continuance motion specifically (and every motion generally, see T.C. Rule 50) is supposed to include whether it is objected to or not by the opposing party. At the moment, it is rather hard to get a word from IRS Counsel as to whether they reject, because they aren’t really around.

I could easily go broke betting on when this shutdown will end, but one thing I am confident of is that there is a lot of work piling up for the Tax Court and IRS in the meantime. On return from the shutdown you don’t want to greet the Tax Court judge with a motion that effectively says “let’s keep this case in your (massive) to-do pile because, man, that shutdown was rough.” Rather, try to empathize: “I know you have a lot on your plate, and we’re working to get this case resolved without a trial (or with as orderly a trial as possible). Help us help you by giving us time to do that.” By (1) letting the court know as far in advance as possible of the need for continuance, (2) providing specific reasons why the continuance is in their interest, and (3) drawing up a plan for how to work towards a resolution of the case you demonstrate to the Court that you are doing your part to keep things orderly and efficient.

 

Caleb Smith About Caleb Smith

Caleb Smith is Visiting Associate Clinical Professor and the Director of the Ronald M. Mankoff Tax Clinic at the University of Minnesota Law School. Caleb has worked at Low-Income Taxpayer Clinics on both coasts and the Midwest, most recently completing a fellowship at Harvard Law School's Federal Tax Clinic. Prior to law school Caleb was the Tax Program Manager at Minnesota's largest Volunteer Income Tax Assistance organization, where he continues to remain engaged as an instructor and volunteer today.

Comments

  1. Special Trial Judge Diane Kroupa issued orders in five other cases at the November 4, 2013 trial session in Salt Lake City. The case names and docket numbers are:

    King, 10732-12

    Kotler, 11339-12

    Lewis, 15120-12

    Hollis and Briggs, 11940-12

    Tran Star, 26528-12

    The first case is a companion to the one you discuss, Docket No. 24802-12. In that one, the petitioner’s full name was Merrill L. Bone, which reminds me of the London Tube station Marylebone, pronunciation of which can be researched online. In any case, Merrill L. Bone is the intervenor in this King case. Judge Kroupa also retained jurisdiction and required either a stipulated settlement or a status report by February 3, 2014.

    After status reports in February and May, a stipulated decision was entered in August by Judge Thornton. Apparently King won innocent-spouse relief on some, but not all of the deficiencies for 2007 and 2008. Status reports and a stipulated decision were also filed on the same dates, in the companion case. Bone also seems to have avoided liability, as an innocent spouse, for about half the tax owed. Others may read the stipulated decisions differently, but we can all agree it’s better that these cases did not go to trial.

    In the second case, there were similar continuances and status reports followed by a stipulated decision signed by Judge Thornton in July, 2014, in which the petitioners agreed to pay more than $120,000 tax, plus late-filing penalties for 2009 and Section 6662 penalties for 2008, 2009 and 2010.

    In the third case, in which petitioner husband has the same name as my barber of 35 years (who at 72 does more work standing up than I do sitting down) but is not the same person, petitioners were ordered to file a status report in thirty days. After three more orders requiring monthly status reports, a stipulated decision was signed by Judge Kroupa on March 27, 2014. Petitioners, representing themselves, agreed to pay more than $50,000 tax for 2009 and 2010, plus Section 6662 penalties. Are pro se petitioners kept on a shorter leash (monthly status reports, not every three months) than those with lawyers, as in the first two cases?

    In the fourth case, IRS had asked for a continuance on October 22, 2013, and then on the trial date also filed a motion for sanctions pursuant to Section 6673(a). The case was continued “generally,” and the motion for sanctions was denied without prejudice.

    What this meant was that the case went to trial about a year later, on December 1, 2014, in Salt Lake City before Judge Ronald Buch. His seven-page bench opinion is largely an apology for explaining why petitioners’ tax-protester arguments are frivolous and futile, when the Ninth Circuit doesn’t require such detail.

    https://ustaxcourt.gov/UstcDockInq/DocumentViewer.aspx?IndexID=6488554

    And Judge Buch ends with,

    THE COURT: So with that we’ll just go off the record. Nobody needs to get up when I get up.
    (Whereupon, at 6:15 p.m., the above entitled matter was concluded.)

    Petitioners owed $5,924 tax, $1,185 Section 6662 penalty, and $500 sanctions under Section 6673(a).

    In the fifth case, petitioner’s counsel had filed a motion to withdraw on July 15, 2013, which was granted. No one showed up for petitioner at the calendar call, so the IRS motion to dismiss for lack of prosecution was granted, and Judge Kroupa’s “Order of Dismissal and Decision” found that $949,235 tax was owed, with late-filing and Section 6662 penalties added.

    (And by the way, the February 4 trial sessions have now been canceled.)

  2. I filed a motion for continuance 31 days before my February 4 calendar call. The Tax Court’s website today indicates that the January 29 and February 4 trial sessions are cancelled. Today, I received an order canceling the February 4 trial session, denying my motion for continuance as moot, and indicating that a new trial date will be set that provides at least 60-days advance notice of the new trial date.

  3. Norman Diamond says:

    “The most natural consequence of a shutdown (and the break in communication between parties) is that additional time is needed -either on deadlines that have previously been established (see T.C. Rule 25(c)), or for the trial itself (see T.C. Rule 133).”

    Yeah, no kidding.

    IRS needs additional time: motion granted. Petitioner needs additional time: motion denied.

    Trial is calendared during the period of visa renewal (in 2011 under the old system) so if petitioner goes to the US they will not be allowed back into Japan and will lose their social security credits (in 2011 under the old system) so petitioner moves for rescheduling: motion denied (but immigration officials sympathize and allow early submission of visa renewal application). Trial is calendared (January 2013, i.e. no shutdown pending), petitioner postpones heart surgery, petitioner purchases discounted (nonrefundable) plane tickets, court decides for itself to reschedule: rescheduling granted, petitioner moves to reinstate original schedule and IRS DOES NOT oppose: motion denied, petitioner postpones heart surgery again, etc.

    Luckily this is Tax Court. It gets worse in other courts.

  4. I searched the Tax Court website “Orders” section to find out how many cases had trials canceled at the February 4 session in Hartford, Connecticut. I found 50 of them.

    Most of the orders were signed by Chief Judge Foley on January 15, and state:

    “Due to the partial Federal government shutdown, the trial session scheduled to begin in Hartford, CT on February 4, 2019, is canceled and the parties do not need to appear at Court on February 4, 2019.
    For cause, it is
    ORDERED that the trial session scheduled to begin in Hartford, CT on February 4, 2019, is hereby canceled. A new trial date will be scheduled and the Court will provide the parties with at least 60 days’ advance notice of the new trial date for this case.”

    Hartford is one of seven cities for which February 4 trials were canceled. Trials in five more cities starting February 11 have now been canceled. Those cities include New York and Los Angeles.

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