In Uncategorized on 07/23/2015 at 18:29

JOAN. Thou are a rare noodle, Master. Do what was done last time is thy rule, eh?

G. B. Shaw, Saint Joan, 1920

A designated hitter from Judge Halpern brought to mind Joan of Arc’s retort to Canon de Courcelles. This is Leroy Loudermilk a.k.a. Lee Loudermilk, Docket No. 12054-11, filed 7/23/15.

Lee is griping over IRS’s desire to nail him for transferee liability without having first pursued the transferor in the give-and-go he set up to dispose of the assets in his C Corp, while not paying corporate tax. The usual.

Of course, State law controls, and the Shockley case (see my blogpost “Gude Faith, He Maun Fa That”, 6/22/13) would sink Lee’s argument if Illinois follows Wisconsin.

Judge Halpern isn’t going there, because IRS told enough of its tale of woe to convince Judge Halpern that Lee has the bucks.

To bolster his case, Lee calls on Robert McKenzie, ex-IRS chaser of defaulting rogues. Robert is going to testify based on his report, as an expert.

IRS of course moves to toss Expert Robert McKenzie.

“The report continues that, specifically, Mr. McKenzie will testify that, before proceeding against petitioner, the IRS should have made additional collection efforts against Midwest and its successors. The McKenzie report is 23 pages long. Two plus pages recite his qualifications. Two pages recite the facts he relied on in forming his opinion and the documents he reviewed. Two plus pages list additional efforts that he believes the IRS should have taken to collect the debt from the transferor and others. Thirteen pages recite numerous cases, statutes, regulations and provisions of the Internal Revenue Manual as the basis of his opinions. Finally, two plus pages, under the heading ‘Conclusion/Summary of Opinion’, express again all the things that the IRS should have done and express his opinion ‘that the IRS should have taken further steps to confirm the transferor’s inability to pay before seeking transferee liability against Loudermilk.’” Order, at p. 4.

“Principally, respondent argues that the McKenzie report will not assist the Court because, in the main, it does not help us to understand the evidence or determine a fact in issue, but, rather, it is a prohibited intervention into the function of the Court to draw legal conclusions; i.e., what are reasonable collection efforts. We agree. While perhaps the report contains a fine listing of collection efforts that the IRS could have taken, Mr. McKenzie’s conclusion that the IRS’s efforts ‘do not meet the standard of ‘reasonable efforts’ seems to hinge on just that, what the IRS could have done. Whether what it did do is sufficient is (if relevant) another story. Respondent is right. Without reference to external standards of reasonableness for the sufficiency of collection actions, Mr. McKenzie’s opinion is simply that, his opinion. As described below, based on his experience, we might receive his testimony as to industry practice, but, without more, we will not accept his testimony as to the reasonableness of the IRS’s collection actions.” Order, at p. 5.

Well, what is “industry practice”?

“What is reasonable can be informed by what is customary or usual practice. (‘What usually is done may be evidence of what ought to be done * * *’); (evidence of usual business practice relevant in determining whether contract performance was commercially reasonable). And experts may testify to usual business practice based on their specialized experience. Although we shall grant the motion in limine, there is still time pursuant to our standing pretrial order for petitioner, if he wishes, to submit Mr. McKenzie’s report as to industry practice. Although our rules contemplate that, if the Court permits, a witness may testify as to industry practice without a written report, see Rule 143(g)(3), we think that here, in fairness to respondent, if Mr. McKenzie or any other witness is to testify as to industry practice, a written report complying with Rule 143 is required.” Order, at p. 5 (Citations omitted).

Industry practice is “do what was done the last time,” rare noodle.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: