In Uncategorized on 06/30/2017 at 16:36

The prelude to a bunch of papers in litigated cases gets transformed, as Judge Goeke unloads eight (count ‘em, eight) pages of undesignated order on this poor, hard-laboring blogger and Estate of Richard L. Marshall, Deceased, Patsy L. Marshall, Personal Representative, and Patsy L. Marshall, Transferees, et al., Docket No. 27241-11, filed 6/30/17, just as I was thinking of taking off for the three-day weekend. And I bet Patsy and the als aren’t best pleased either, although this is going to smart for them more than a wee bit.

This is the dénouement of a Section 6901 transferee case, as you’ll deduce from the caption. For an ultra-brief synopsis of the backstory, see my blogpost “Schooled and Unschooled,” 6/20/16.

The dust has settled, the Section 155 beancount is almost done, the lawyers are packing the lit bags, the accountants are shutting the adding machines and folding two miles of tape, when someone says “prenotice interest.”

That’s when the fight starts.

Transferee liability cases compute interest in two parts: first, no earlier than date of transfer up to, but not including, and not after, the date of notice of liability. Next, interest from notice to payment.

State law determines the prejudgment interest (in Tax Court “prenotice”), and here it’s OR. Judge Laro dealt with the TX version in my blogpost “Deep in the Heart of Texas – Part Deux,” 7/8/15.

Anyway, the long and short of it is that the start date for prejudgment interest depends upon knowing the amount due and the date when it became due. That the number is difficult to ascertain and may involve mathematical complexity doesn’t stop the start date if the debtor-taxpayer knew they owed something.

And here the date’s certain, when the Marshalls got the boodle from the mix-and-match Midco.

I’m not quoting Judge Goeke’s law review article here, so he can publish it afresh in the University of Oregon Law Review. After all, that illustrious institution describes itself thus: “(W)e don’t view law school as ruthless competition. We view it as a way to make a positive difference. We’re known for a friendly, supportive, and collaborative environment—and any of our students will tell you this.”

Makes me weep.

Howbeit, the Marshalls get mulcted for $8 million in prejudgment interest. And their shot at equitable recoupment, OR State law or anything else was shut down last June.

“Second, petitioners are not entitled to reductions in judgment based on Or. Rev. Stat. sec. 95.270(3), the doctrine of equitable recoupment, or any other offsets. In Estate of Marshall, we determined that petitioners were not entitled to any offsets, adjustments, or other reductions to the amount of their transferee liability under Or. Rev. Stat. sec. 95.270(5) because they had at least constructive knowledge that MAC’s tax liability would not be paid. Petitioners are now attempting to reduce their transferee liability by making the same arguments under Or. Rev. Stat. sec. 95.270(3) and the doctrine of equitable recoupment in their Rule 155 computations that they presented in their briefs.” Order, at p. 5.

The Marshalls knew the deal was a tax dodge, got the boodle, and moreover got the boodle with a premium of 60% over what anyone else would pay because they knew the Midco was going to walk on the tax liability.

OR statutes talks about “equities,” but the Marshalls have none. For equitable recoupment, use Section 1341, not a Rule 155 beancount. And the Marshalls got whatever credit to which they were entitled under equal access to justice for their fight with the Bureau of Reclamation; no more here.

Have a great weekend.

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