In Uncategorized on 06/24/2016 at 21:22

Courts aren’t infallible (and I can hear my colleagues one Bloody Mary ahead of me saying “You can say that again, chum”), but there are two main judicial errors to compare and contrast in this evening’s chat. These are harmless error and prejudicial error.

Prejudicial error is what keeps appellate judges in business. They call the off-sides, legs before wicket and suchlike, that deprive one party of a truly fair shake.

It’s the other I wish to speak of just now.

Yes, the Judge let in evidence she shouldn’t have, or the Judge left out evidence he should have let in, but at close of play the party making the squawk got a fair shake.

Now Judge James S. (“Big Jim”) Halpern confronts what to do post-decision when an expert witness’ testimony was admittedly false. The case is AD Investment 2000 Fund LLC, Community Media, Inc., A Partner Other Than The Tax Matters Partner, et al., Docket No. 9177-08, filed 6/24/16. And if this seems to jog your memory, it jogged mine.

See my blogpost “Haber-Dashery,” 11/19/15.

This is one of the celebrated immunologist James (“Little Jim”) Haber’s Bialystoks. For those who tuned in late, a Bialystok (noun form) is a deal where the counterparty is guaranteed a huge recognized loss offset by an equally huge unrecognized gain. I call it so in honor of the celebrated producer Max Bialystok, whose deals, if they made any money, would land Max in jail.

Well, here one of the IRS’s expert witnesses, whom I’ll call Murph, was a wee bit casual about his resume and the cases in which he had testified.

When Murph was shown up post-trial as a Fibber First Class, “(W)e concluded that his report did not accord with the requirements of Rule 143(g), Tax Court Rules of Practice and Procedure, addressing expert witnesses and we excluded it. Rule 143(g)(2) provides that an expert’s testimony will be excluded for failure to comply with Rule 143(g) unless the failure is shown to be due to good cause and unless the failure does not unduly prejudice the opposing party. Since [Murph] has already testified, we cannot at this point not allow him to testify. Petitioners argue that, in the present cases, [Murph]’s testimony was material and that the Court’s decisions in these cases should be vacated.” Order, at p. 1.

As the late great Ed MacMahon would have said “How material was it?”

That’s what Judge Big Jim wants to know.

IRS is down with vacating the prior decisions and going into Murph’s credentials.

Judge Big Jim has a lengthy laundry list of questions for petitioners and IRS, but the bottom line is simple: had Murph not testified at all, would there have been any evidence that Little Jim’s mix-and-match was anything other than a Bialystok?

And if all the remaining evidence was that the deal was a Bialystok, what does Judge Big Jim do?

Harmless error?

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