When and Where to Make Your Arguments

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Two recent cases highlight the issues of when and where to make arguments.  Neither decision sets significant precedent but both serve as reminders of how to approach litigation.

The Tax Court issued an order on May 15, 2014 in Amazon.Com, Inc. v. Commissioner denying Amazon’s request to amend its petition.  This case instructs on the “When” question.

A recent 9th Circuit case, Estate of Saunders v. Commissioner, provides instruction on the “Where” questions and points out why law professors should take care before becoming appellate advocates.


The order entered in the Amazon case denies Amazon’s Motion for Leave to File Amendment to Petition.  The underlying tax issue involves IRC 482 and the proper share of reasonably anticipated benefits (RAB).  Amazon made one allocation in the year before the Court and later decided that another method better reflected actual net revenue.  It filed its Tax Court petition on December 28, 2012.  At that time it had not adjusted its thinking regarding RAB.  The change in its approach came in 2013 and early 2014.  The change involved not only the years under examination at that point but also the years before the Tax Court.  Amazon filed its motion on March 24, 2014 and the IRS opposed the motion.

The change in RAB, if allowed, would save Amazon $27.8 million.  The IRS said the first it heard of the change applying to the years before the Court was March 7, 2014.  The IRS claimed that allowing the motion would prejudice it and that even if allowed the amendment would be “futile” since the regulations do not allow changing RAB retroactively.

The Court looked to Tax Court Rule 41(a) which provides that when more than 30 days has passed after an answer has been served, “a party may amend a pleading only by leave of Court or by written consent of the adverse party, and leave shall be given freely when justice so requires.”  The Court cited prior decisions on this issue and the factors developed from those cases:  1) whether an excuse for the delay exists and 2) whether the opposing party would suffer unfair surprise disadvantage, substantial inconvenience or prejudice.

Here the request to change RAB came eight years after the close of the tax years and fifteen months after the filing of the petition.  In finding that allowance of the motion would prejudice the Government, it found undue delay in raising the issue and that the complex and fact intensive nature of the issue would almost a new audit on this issue because of the point in the case in which it was raised.

Representing low income taxpayers and coming into that representation most often after the passage of 30 days following the answer, the tax clinic at Villanova regularly finds issues in the cases of our clients previously missed.  The Tax Court generally allows amendment in these circumstances both because of its desire to keep previously unrepresented from being prejudiced and because the issues do not involve the complexity present in the Amazon case.  With this order, the Tax Court issues a reminder that a represented party bringing a Tax Court case should carefully review the case prior to the petition and identify any issues not covered in the notice prior to the closing of the pleadings.  When in the context occurs before or very shortly after the filing of the petition.

The second case, the “Where” case involves the deduction an estate should receive for a claim against the estate.  The estate wanted a large deduction and the IRS did not want to allow the large speculative deduction but rather the smaller actual amount of the post death settlement.  In a footnote in the opening and in the reply brief, petitioners argued that the Tax Court violated the Tax Court Rules of Practice and Procedure.

Footnotes are the lifeblood of law professors’ compositions.  What would an article be if it did not contain so many footnotes that the reader was overwhelmed and totally impressed?  Putting long and sometimes important discussions in footnotes seems only natural from the perspective of law professor.  In a footnote, of course, the 9th Circuit states “Arguments raised only in footnotes, or only on reply, are generally deemed waived.  City of Emeryville v. Robinson, 621 F.3d 1251, 1262 n.10 (9th Cir. 2010); Graves v. Arpaio, 623 F.3d 1043, 1048 (9th Cir. 2010)(per curiam).  We therefore decline to address this argument.”  Wow!

In general courts are reluctant to preserve an argument raised in a footnote on appeal.  A 6th Circuit Court held that a plaintiff had waived an argument because it was raised only once in a footnote in its brief.  The 7th Circuit Court has stated an argument from the plaintiff was waived because it was mentioned only once in a footnote in its brief.  These holdings suggest that all arguments should be in the main text of a brief so they can be preserved on appeal.  While footnotes may be commonplace for law professors aspiring lawyers should be hesitant to utilize a footnote in briefs.

A recent law review article from John Marshall summarized the issue, “If the information is not important enough to include in a paragraph, does it really need to be included at all?” The article advised that footnotes are best used to explain a precedent or explain an issue that could be unclear or ambiguous.  However, footnotes should not be used to make arguments that are fundamental to the brief.



  1. The following is from the transcript of the oral argument in Cuno v. DaimlerChrysler, Inc., 545 U.S. 1165 (2006):

    Mr. Enrich: In a footnote in Flast [v. Cohen], the Court specifically says, “Having now decided that there’s Establishment Clause standing, we can also reach the free-exercise question without discussing whether there would be independent standing.”

    Justice Scalia: I had not recollected that footnote. I will — I will find it. I don’t read footnotes, normally.

  2. Also, on footnotes (a discussion I have now moved to an appendix in my book):
    “Encountering [a footnote], is like going downstairs to answer the doorbell while making love.” Attributed to Noel Coward in Arthur A. Austin, Footnotes as Product Differentiation, 40 Vand. L. Rev. 1131, 1152 (1987); NPR Weekend Edition Transcript, “The Possible Demise of the Footnote” (Sept. 7, 1996). The attribution to Coward may be imperfect, as Prof. Austin develops in a subsequent, appropriately long, footnote. See Arthur A. Austin, Footnote*, Skulduggery** and Other Bad Habits***, 44 U. Miami L. Rev. 1009, 1012 n.20 (1990). Still, regardless of who said or should have said it, the point is well made.
    ** Over the years the footnote has regularly provided a safe refuge for untenable hypotheses. Writers are inclined to behave as if they will be held less accountable for indiscretions committed below the text than in it. . . . Lunacy in small print is lunacy nonetheless, and it is particularly reprehensible when it is not even amusing.
    Arthur A. Austin, Footnote*, Skulduggery** and Other Bad Habits***, 44 U. Miami L. Rev. 1009 (1990) (as an article title footnote, with the other article title footnotes omitted), quoting Bowersock, The Art of the Footnote, 53 Am. Scholar 54, 61 (1983/1984). To the extent that I have lunacy here, I hope it is at least amusing.
    “Sometimes, he wrote, the only places to find any individuality or whimsy in the pages of Supreme Court decisions is on their bottoms.” David Margolick, The Footnote Fetish in Judicial Opinions: A Weather Vane of High Court Philosophy, The New York Times, Jan. 4, 1991 (attributing statement to Tony Mauro).
    “Happiness is a long footnote. Happiness for whom? For him who writes it?” Arthur A. Austin, Footnote*, Skulduggery** and Other Bad Habits***, 44 U. Miami L. Rev. 1009, 1016 (1990).

  3. Carl Smith says

    It is not all gloomy for new arguments, Keith. Indeed, there was a recent example of where a Court of Appeals allowed a new argument raised by counsel at the appellate level, when the taxpayer failed to raise it in the Tax Court (at the time the taxpayer was pro se). The court pointed out that the rule is that “generally”, the appellate courts do not consider new arguments. But, “generally: means that there can be exceptions.

    Thee case was Haury v. Commissioner, 2014 U.S. App. LEXIS 8808 (8th Cir. May 12, 2014), rev’g T.C. Memo. 2012-215. There, a taxpayer had not filed a tax return for 2007, so the IRS proposed one for him in a notice of deficiency that included as income $434,964 of IRA distributions that the taxpayer took throughout 2007. The taxpayer filed a Tax Court petition pro se, taking the position that $120,000 of distributions should be excluded from income because that amount was rolled over within the 60-day required period on April 30, 2007. At trial, the IRS pointed out that the taxpayer made a withdrawal of a matching amount of $120,000 more than 60 days earlier, on February 15, 2007, and based on this, the Tax Court held that there was no qualifying rollover contribution. After retaining counsel for the appeal, the taxpayer’s counsel noticed that the taxpayer had made a withdrawal of $168,000 on April 9 – only 21 days before the $120,000 contribution. The new counsel argued for the first time that the $120,000 contribution was a timely partial rollover of the $168,000 distribution.

    Considering this new argument, the court wrote: “That the 60-day limit . . .was satisfied is clearly correct, as government counsel reluctantly acknowledged at oral argument.” Id., slip op. at 4-5. The government argued, however, that by not contradicting the IRS’ argument at trial, the taxpayer had waived this new argument. The court responded:
    “Frankly, we are appalled by the unfairness of this contention . . . . The Tax Court was obligated to fairly apply the statute to the facts presented, particularly for a taxpayer who is pro se. See Transp. Labor Contract/Leasing, Inc. v. Commissioner, 461 F.3d 1030, 1034 (8th Cir. 2006). Though we generally do not consider issues not raised below, as the Supreme Court said in a tax case many years ago, we should ‘where injustice might otherwise result.’ Hormel v. Helvering, 312 U.S. 552, 557 (1941). We conclude this is such a case.” Id. at 5.

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