Take the Fifth

Designated for publication

• Goldring v. U.S., 20-30723, appeal from E.D. La.
  • Engelhardt, J. (Jones, Southwick, Engelhardt), tax
  • Affirming in part and reversing in part district court’s summary judgment in favor of government dismissing taxpayers’ refund claims in their entirety.
  • In separate litigation, one of the taxpayers had prevailed in a suit to have her stock in a company that had been subject to merger and stock cancellation valued at a higher per-share basis, and the award in that lawsuit included the increased value for the canceled stock, pre-judgment and post-judgment interest, and court costs and expert fees. The taxpayers took the position that both the stock-valuation award and the interest were taxable at a lower capital gains rate, but paid their taxes as if the interest would be taxed at the higher rate for ordinary income, in order to not be assessed with underpayment penalties if the IRS took that position. The taxpayers in subsequent years used that overpayment as a credit to go toward tax liabilities in those subsequent years. The IRS then assessed underpayment interest upon determining in an audit that the lawsuit interest was ordinary income, assessing that interest from the point when the overpayment-as-credit had been used by the taxpayers to cover subsequent tax liabilities. The taxpayers then brought suit for a refund, arguing that the interest was capital gains, and that the IRS’s assessment of underpayment interest accrued too early. The district court found in favor of the government on both the capital gains issue and the interest-accrual issue.
  • The Court noted that “[t]he mere fact that litigation proceeds awarded in a final judgment are labeled ‘interest’ does not automatically make those proceeds ordinary income. Rather, litigation proceeds are ordinary income when they serve to indemnify taxpayers for ‘what they might have earned on the sum found to be the value of the property on the day the property was taken’ if that sum had been ‘put in the taxpayers’ hands’ on that day.” (Internal citations omitted). The Court held that the interest portion of the taxpayers’ underlying litigation award was separate and distinct from the stock-valuation portion of the award. “The Interest Award … served to indemnify Mrs. Goldring for ‘what [she] might have earned’ on the fair value of her shares if that money had been ‘put in [her] hands’ on the merger date.” (Internal citations omitted).
  • However, as to the accrual date of underpayment interest, the Court held that the IRS began assessing interest too early, as the taxpayers had paid the full amount to the IRS when it was due, though they invoked the option to use it to go toward future tax liabilities. Under the “use of money” principle, the Court held that “a taxpayer is liable for interest only when the Government does not have the use of money it is lawfully due.” The Court held further, “[T]he Government’s argument in this case fixates on theoretical migration of credit-elect overpayment funds from one tax year to another. See 26 U.S.C. § 6513(d); 26 C.F.R. § 301.6402- 3(a)(5) However, this argument completely ignores the simple, undisputed fact that the IRS was never deprived of its use of the money the Goldrings lawfully owed it at any point during the five-year underpayment interest assessment period.”

• Neptune Shipmanagement Services PTE, Ltd. v. Dahiya, 20-30776, appeal from E.D. La.
  • Costa, J. (Jones, Southwick, Costa), arbitration, res judicata, removal
  • This matter arises from a seaman’s burns suffered while on a crew that was manning a bareboat chartered tanker; while the vessel interests were many and tangled, the seaman was contracted to the ship crew company under an employment contract (“the Deed”) containing an arbitration clause requiring arbitration in India or Singapore. “This case involves even more protracted litigation arising out of an arbitration agreement. In a dispute dating back to the last century, the parties have turned to Louisiana state court, federal court, civil court in India, and arbitration to resolve their dispute. Although Vinod Kumar Dahiya has secured an arbitral award for his maritime injuries, he continues to pursue litigation against the alleged wrongdoers—and he still disputes that there was an enforceable agreement to arbitrate at all.”
  • The Court held first that the federal courts were not precluded from ruling on the vessel interests’ suit to confirm the award from arbitration that occurred after the federal district court had remanded the seaman’s original, pre-arbitration lawsuit back to state court. “A remand order issued nineteen years ago in a different lawsuit has no impact on the district court’s ability to confirm the award. … [E]ven in the same case, a defendant may seek removal more than once, so long as the request rests on different grounds, like new pleadings or ensuing events that reveal a basis for federal jurisdiction. Surely, then, a federal court may hear a separate action premised on new factual developments that support federal jurisdiction. That describes this new case, as it seeks to confirm an arbitration award that did not exist back in 2002. This case was never pending in state court; it is a new action distinct from the litigation seeking to compel arbitration.”
  • The Court then held that the seaman’s arguments in the confirmation suit–that the arbitration clause was invalid because the ship crew company never signed it and that the clause wasn’t effective as to the other vessel interests that were not parties to the employment agreement–were precluded by the state courts’ adjudication of that issue in the original suit after it had been remanded to state court.

Unpublished

• Berlanga v. Easterling, 19-20801, appeal from S.D. Tex.
  • per curiam (Smith, Stewart, Graves), prisoner suit
  • Dismissing as frivolous appeal from denial of motion to introduce newly discovered evidence or to extend the time for appeal.

• Buchanan v. Harris, 20-20408, appeal from S.D. Tex.
  • per curiam (Jones, Southwick, Costa), prisoner suit, Americans with Disabilities Act
  • Reversing in part district court’s dismissal of prisoner’s claims that prison officials had denied him accessible facilities under the ADA.

• U.S. v. Young, 20-30492, appeal from W.D. La.
  • per curiam (Elrod, Southwick, Costa), criminal, sentencing
  • Vacating sentence on conviction for passing counterfeited bills, and remanding for resentencing to consider four-month state sentence for related conduct.

• Watkins v. Carter, 20-40234, appeal from E.D. Tex.
  • per curiam (King, Smith, Haynes), Bivens claim
  • Affirming district court’s dismissal of inmate’s Bivens claim arising from allegations that prison officials violated his constitutional rights by pushing him, wrestling him to the ground, and kicking him, all to force him into a shared cell with another inmate.

• Meeks v. Nash, 20-40252, appeal from E.D. Tex.
  • per curiam (Davis, Jones, Elrod), prisoner suit
  • Affirming dismissal of prisoner’s § 1983 claims arising from damage and loss of belongings during a transfer to a new facility.

• Hines v. Marshall, 20-40444, appeal from E.D. Tex.
  • per curiam (Southwick, Oldham, Wilson), prisoner suit
  • Affirming dismissal of prisoner’s suit alleging retaliation by a prison official after his filing of grievances.

• Tiem v. First American Title Co., 20-40707, appeal from E.D. Tex.
  • per curiam (Jones, Southwick, Engelhardt), timeliness, removal
  • Holding that appellant’s appeal was timely from the only judgment that was an actual appealable judgment in the matter, but affirming the denial of remand because the plaintiff failed to state a viable claim against the non-diverse defendant, and affirming the dismissal of claims against the other defendants for failure to state a claim.

• Diop v. Garland, 20-60678, petition for review of BIA order
  • per curiam (Southwick, Oldham, Wilson), immigration
  • Denying petition by Senegalese citizen to review BIA order dismissing his appeal from the denial of his application for relief from removal and denying his alternate motion to remand.

• Florence v. Gibbs, 21-10060, appeal from N.D. Tex.
  • per curiam (Jones, Duncan, Engelhardt), prisoner suit
  • Denying motion for IFP status to appeal dismissal of § 1983 action, and dismissing appeal.

• U.S. v. Smith, 21-10092, appeal from N.D. Tex.
  • per curiam ((Southwick, Oldham, Wilson), criminal, sentencing
  • Affirming concurrent 180-month sentences on conviction of one count of conspiracy to commit sex trafficking of a minor and one count of sex trafficking of a minor.

• Butler v. Anderson, 21-20143, appeal from S.D. Tex.
  • per curiam (Smith, Stewart, Graves), prisoner suit
  • Dismissing as frivolous appeal from dismissal of § 1983 claims arising from allegations that facility lost his property.

• U.S. v. Daniels, 21-50024, appeal from W.D. Tex.
  • per curiam (Smith, Stewart, Graves), criminal, sufficiency of evidence
  • Affirming defendants’ convictions of one count of conspiring to possess with the intent to distribute five grams or more of actual methamphetamine.

• U.S. v. Atkinson, 21-50236, appeal from W.D. Tex.
  • per curiam (Smith, Stewart, Graves), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• U.S. v. Bernardez-Palacio, 21-50243, appeal from W.D. Tex.
  • per curiam (King, Costa, Ho), criminal, sentencing
  • Affirming 46-month sentence on conviction of illegal reentry.

• U.S. v. Villa, 21-50280, appeal from W.D. Tex.
  • per curiam (Smith, Stewart, Graves), criminal, compassionate release
  • Affirming denial of motion for compassionate release.