For Lawyers

 Following on my blogpost “The Phone Call”, 4/15/14, a further cautionary tale for lawyers emerges today from the word processor of Judge James B. (“Big Jim”) Halpern, a reminder that Judge Big Jim keeps the Section 6673(a)(2) hammer by his side.

Remember the Section 6673(a)(2) hammer? No? Well, it’s the delay of the game by reason of unreasonably and vexatiously multiplying the proceedings of a case. Stale pun (sorry, Judge Posner, but you don’t read my blogposts anyway): vexatious (Vic Seixas) played on the US Davis Cup teams, winning the 1953 David Cup matches.

Back to serious business. The case in point is Leonard L. Best and Evelyn R. Best, 2014 T. C. Memo. 72, filed 4/28/14.

I’m limiting my frivolity discussion to L.L.’s and Eve’s attorney, whom I shall call Mac.

Judge Big Jim hits L.L. and Eve with a $5K Section 6673(a) chop, notwithstanding that L.L. and Eve claim: “‘Petitioners, who are high school educated and lack any sophistication, in good faith relied on their competent, qualified, and independent counsel; this alone is sufficient to demonstrate good cause, thus negating imposition of the sanction sought.’” 2014 T. C. Memo. 72, at p. 20.

Judge Big Jim isn’t listening: “…petitioners’ arguments that (1) [the SO] abused her discretion in relying on computer transcripts to verify that their unpaid tax had been properly assessed and (2) collection cannot proceed because respondent has failed to furnish them records of the assessments of their … tax lack merit and are contrary to established law. The deficiencies in petitioners’ arguments are well known. Indeed, the Commissioner has taken pains to describe for taxpayers the requirements of section 6203, the procedures implementing that section, and the procedures for answering a taxpayer’s request for a copy of the record of the assessment. See Rev. Rul. 2007-21, supra. Arguments very much like the ones petitioners here make are described in Notice 2010-33, 2010-17 I.R.B. 609, listing positions identified as frivolous for purposes of application of the section 6702 frivolous tax submissions penalty. Respondent’s counsel brought the revenue ruling and the notice to the attention of [Mac] in February 2012, three months before the parties jointly moved for leave to submit this case for decision without a trial. Petitioners could have pulled the plug then and very likely avoided any sanction.” 2014 T. C. Memo. 72, at pp. 20-21.

Finally, “The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled principles before they file returns and litigate.” 2014 T. C. Memo. 72, at p. 22.

What about Mac? “Rule 33(b) sets standards in connection with counsel’s signature on a pleading and provides that upon our own motion we may sanction counsel for failure to meet those standards. Although we have found petitioners deserving of a section 6673(a)(1) penalty, we believe that [Mac]’s conduct may be deserving of a sanction for unreasonably and unnecessarily bringing and prolonging these proceedings. Indeed, in his declaration in support of petitioners’ response to respondent’s motion to impose a sanction on petitioners, he acknowledges that, following the earlier deficiency proceeding in this case, petitioners ‘had a major collection problem and * * * I decided to try the assessment issue believing there is some chance of lack of proper assessment which will result in voiding the assessment and causing the clients to be free of the debt as a result of the statute of limitations’.” 2014 T. C. Memo. 72, at p. 23.

And Mac then concedes one of his arguments is “a dead letter”. 2014 T. C. Memo. 72, at p. 22.

But since Mac hasn’t had a chance to defend himself, Judge Big Jim tells him to show cause why he shouldn’t get either the Rule 33(b) you-signed-it sanction or the Section 6673(b)(2) vexatious-unreasonable-multiplication chop.

Counsel, you have been warned.