I do not know the identity of the attorney who settled and stiped out the “… total deficiency, addition to tax, and accuracy-related penalty for 2011 of $14,325, reduced from $58,094.59 as determined in the notice of deficiency. For 2012,  petitioners are liable under the Stipulated Decision for a total deficiency and accuracy-related penalty of $102,055, reduced from $381,702 as determined in the notice of deficiency….” for Hamdi Rafai and Nancy Rafai, Docket No. 10273-15, filed 1/22/21, at p. 2, but knocking out “nearly 75% of the aggregate deficiencies, addition to tax, and penalties [IRS] originally determined in the notice of deficiency,” Order, at p. 7, isn’t exactly shabby. And Judge Gale as a lot more to say about that, infra (as my expensive colleagues would say).

Howbeit, Ham & Nan want a Rule 162 vacation. Of the stipulated decision. Two (count ’em, two) years after the stiped decision was entered.

Yes, before decision becomes final (Sections 7481(a)(3), and 7483) Tax Court has broad discretion to vacate, modify, or whatever. Two years out, however, mere want of authority of attorney and failure to notify client, doesn’t get it. Ham & Nan (with new counsel) claim fraud on the court.

“In that context, the Fourth Circuit has explained that ‘not only must fraud on the court involve an intentional plot to deceive the judiciary, but it must also touch on the public interest in a way that fraud between individual parties generally does not.’ Consequently, fraud on the court is a narrow doctrine, ‘limited to situations such as ‘bribery of a judge or juror, or improper influence exerted on the court by an attorney, in which the integrity of the court and its ability to function impartially is directly impinged.’”” Order, at p. 4. (Citations omitted).

Ham & Nan are Golsenized to 4 Cir , which, though it has never dealt with Tax Court Rule 162 post-final vacations, have set a high bar for fraud-on-the-court. Fraud has to taint the system and defile its integrity.

“In this case, the allegations in petitioners’ Motion to Vacate do not suggest that their former counsel engaged in misconduct that defiled the Court or that impacts the public interest in a manner that could amount to fraud on the court. … petitioners have not alleged that their former counsel was totally unauthorized to represent one or both of them before the Tax Court. To the contrary, their Motion to Vacate concedes that they jointly retained their former counsel to file the Petition that commenced this case. Nor have petitioners alleged that their former counsel caused the Court to ratify the effects of some fraud perpetrated outside the Tax Court proceeding…. Petitioners merely contend that their former counsel acted without authority, and possibly without fully informing them, with respect to the settlement of this case. In that regard, petitioners have not alleged that respondent’s counsel, or the Court for that matter, could or should have known that their former counsel did not have full authority to act on their behalf. Furthermore, far from suggesting that petitioners’ former counsel colluded with respondent or otherwise acted against petitioners’ interests in settling this case, the Stipulated Decision reflects that petitioners’ former counsel obtained concessions from respondent of nearly 75% of the aggregate deficiencies, addition to tax, and penalties he originally determined in the notice of deficiency. The presentation of such a favorable settlement to the Court, by counsel acting with apparent authority on petitioners’ behalf, could not have deceived the Court in such a way as to preclude it from judging this case impartially.” Order, at pp. 6-7.

Btw, Judge Gale suggests “(P)etitioners’ former counsel may be liable to them in a malpractice action or may be at risk of professional discipline as a result of any negligence or ethical failures that may have occurred in the course of representing petitioners in this case, but as a matter of law such shortcomings would not amount to fraud on the court.” Order, at p. 7.

Takeaway- I hope former counsel put a litigation hold on all e-mails, sent confirmatory writings of all phone calls and face-to-faces to client, and saved copies of all correspondence. And copied clients on every communication with IRS. Their carrier will love them if they did.

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