KELLY H. RANKIN
United States Attorney
CAROL A. STATKUS
Assistant United States Attorney
2120 Capitol Avenue, Room 4002
Cheyenne, Wyoming 82001

ADAIR F. BOROUGHS (Pro Hac Vice)
Trial Attorney, Tax Division
U.S. Department of Justice
P.O. Box 683
Washington, DC 20044
Telephone: (202) 305-7546
Facsimile: (202) 307-0054
E-mail: adair.f.boroughs@usdoj.gov

Attorneys for the United States

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF WYOMING

MARILYN PATRIOT,                )
              Plaintiff,        )       Civil No. 2:08-CV-000-ZZZ
                                )
      V.                        )       UNITED STATES’ OPPOSITION
                                )       TO PLAINTIFF’S MOTION FOR   
UNITED STATES OF AMERICA,       ) 	INTERIM AWARD OF ATTORNEY’S FEES
             Defendant.         )

______________________________________________________________________________________________

The United States, by counsel undersigned, hereby submits the following opposition to Plaintiff’s Motion for Interim Award of Attorney’s Fees. While 26 U.S.C. § 7433 provides for the possibility for recovery of “the costs of the action” if the United States is found liable (27 U.S.C. § 7433(b)), the term “costs” does not include attorney’s fees. Info. Res., Inc. v. United States, 996 F.2d, 780, 785 n.6 (5th Cir. 1993).

I. Procedural History

On October 11, 2007, Plaintiff brought this action against the United States pursuant to 26 U.S.C. § 7433 in the United States District Court for the District of Columbia. See Am. Comp. at 1. Plaintiff requested damages for IRS actions related to a continuous levy served on her pension. See id at ¶¶ 5-13. On December 7, 2007, the United States filed a Motion to Dismiss And Transfer Venue (Docket No. 5). On June 3, 2008, the United States District Court for the District of Columbia denied the United States’ Motion to Dismiss but granted the United States’ Motion to Transfer Venue to Wyoming. See Order (Docket No. 12) and Mem. Op. (Docket No. 13). The parties are currently engaged in discovery and preparing dispositive motions. See Order on Initial Pretrial Conf. (Docket No. 28)(setting the discovery cutoff date and the deadline for dispositive motions for Nov. 21, 2008).

II. In this action, the award of attorney’s fees against the United States is governed by 26 U.S.C. §7430.

In any action brought under 26 U.S.C. § 7433, the award of attorney’s fees against the United States is governed by 26 U.S.C. § 7430.1 26 U.S.C. §7430(a)(“In any...court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, the prevailing party may be awarded a judgment or a settlement for...reasonable litigations costs incurred in connection with such court proceeding.”(emphasis added); see also Wilkerson v. United States, 67 F.3d 112, 119 (5th Cir. 1995)(applying 26 U.S.C. § 7430 in an action brought pursuant to 26 U.S.C. § 7433, stating Plaintiff also cites to Local Rule 54.3(g). See Pl. Mot. For Interm Award of Atty. Fees at ¶ 1. However, a rule of procedure does not act as a waiver of sovereign immunity. See, e.g., Utah v. United States, No. 2:06-CV-595, 2008 WL 4534179 (D. Utah Oct. 6, 2008)(slip copy) at *7 (“Rule 23(h) permits the court to award reasonable attorney’s fees and costs in class actions.

However, this provision does not act as a waiver of the United States’ sovereign immunity from suit.”) “Section 7430 authorizes the award of attorney’s fees and costs to prevailing parties in tax litigation”); Info. Res., Inc., 996 F.2d at 785 (applying 26 U.S.C. § 7430 in an action brought pursuant to 26 U.S.C. § 7433, stating “I.R.C. § 7430 governs the district court’s award of costs and fees to a litigant in a tax case.”).

Plaintiff’s motion relies solely on Equal Access to Justice Act of 1948, 28 U.S.C. §2412.2 See Mem. Br. in Supp. of Mot. for Interim Award of Att’y Fees (Docket No. 30) at ¶¶ 2-4, 6, 8, 12. However, “[t]he provisions of this section shall not apply to any costs, fees, and other expenses in connection with any proceeding to which section 7430 of the Internal Revenue Code...applies.” 26 U.S.C. §2412(e). Thus, the Equal Access to Justice Act does not apply in this action and is not the applicable waiver of sovereign immunity for Plaintiff’s motion.

III. The Court lacks jurisdiction to grant Plaintiff’s motion for attorneys fees until final determination has been made in this action as required by 26 U.S.C. § 7430(c)(4)(C).

Under the doctrine of sovereign immunity, the United States is immune from suit except where it has expressly consented to suit. United States v. Dalm, 494 U.S. 596, 608 (1990); United States v. Mitchell, 445 U.S. 535, 538 (1980); United States v. Sherwood, 312 U.S. 584, 586 (1941). The terms of the United States’ consent define the court's jurisdiction to hear the suit. United States v. Testan, 424 U.S. 392, 399 (1976). This waiver of sovereign immunity must be unequivocally expressed and cannot be implied. Mitchell, 455 U.S. at 538. The “traditional principle” is that the “[g]overnment’s consent to be sued must be construed strictly in To be a prevailing party, the applicant f 3 or attorney’s fees must also show that she has a net worth less than the limitations set by 28 U.S.C. § 2412(d)(2)(B). 26 U.S.C. §7430(c)(4)(A)(ii); Univ. Of Utah v. United States, No. 2:06-CV-595, 2008 WL 4534179 (D. Utah Oct. 6, 2008)(slip copy) at *7. Plaintiff has not done so in her motion. favor of the sovereign,” and not “enlarge[d] . . . beyond that the language requires.” United States v. Nordic Village, Inc., 503 U.S. 30, 34 (1992) (internal citations omitted). If a statute is susceptible to multiple “plausible” readings, under one of which there is no waiver of sovereign immunity, the statute will not be found to have the “ ‘unequivocal expression’ of elimination of sovereign immunity” that the Supreme Court requires. Id. at 37. Just as all waivers of sovereign immunity must be read narrowly, so to do statutes allowing for the recovery of attorney’s fees against the government. See, e.g., Library of Congress v. Shaw, 478 U.S. 310, 311 (1986)(holding that “reasonable attorney’s fee” language in Title VII does not amount to a waiver of the United States’ sovereign immunity from awards of interest on these fees). The ability to collect fees under Section 7430 is “limited by a whole host of conditions and requirements.” Beaty v. United States, 937 F.2d 288, 292 (6th Cir. 1991). In order to obtain attorney’s fees under Section 7430, the litigant must be the “prevailing party” within the meaning of the statute. 26 U.S.C. § 7430(a); Mid-Del Therapeutic Ctr., Inc. v. Comm’r, 30 Fed. Appx. 889, 892 (10th Cir. 2002); Harmer v. Comm’r, 4 Fed. Appx. 673, 675 (10th Cir. 2001); Ralston Dev. Corp. v. United States, 937 F.2d 510, 515 (10th Cir. 1991). For a taxpayer to be a prevailing party within the meaning of the statute, two requirements must be met:

(1) the taxpayer must have “substantially prevailed” with respect to either “the amount in controversy” or “the most significant issue or set of issues presented” and

(2) the United States must not have been “substantially justified” in its position. Even if a taxpayer substantially 4 prevails on the amount in controversy or the most significant issue in a case, she is not necessarily entitled to attorney’s fees. See 26 U.S.C. § 7430(c)(4)(stating United States’ position must not have been substantially justified); Harmer, 4 Fed. Appx. at 675-76 (upholding Tax Court’s determination that, “[a]lthough it was uncontroverted that the [taxpayers] substantially prevailed...with respect to the most significant issue presented,” the government’s position was substantially justified and, thus, no attorney’s fees were recoverable); Mid-Del Therapeutic Ctr., 30 Fed. Appx. at 892-93 (same).

5Plaintiff claims that she has “prevailed against the government by defeating a motion to dismiss her complaint.” Mem. Br. In Supp. Of Mot. For Interim Award of Att’y Fees at ¶ 10.

Plaintiff goes on to claim that she “prevailed on the merits of her claims in the initial stage leading to the transfer of the case...rather than total dismissal.” Id. However, it is well-settled that the standard for defeating a motion to dismiss is a far lower standard than proving one’s case by a preponderance of the evidence. See, e.g., Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007)(To survive a motion to dismiss, “[f]actual allegations must be enough to raise a right to relief above the speculative level...on the assumption that all the allegations in the complaint are true.”)(emphasis added). 26 U.S.C. § 7430(c)(4); Mid-Del Therapeutic Ctr., 30 Fed. Appx. at 892; Harmer, 4 Fed. Appx. at 675; Ralston Dev. Corp., 937 F.2d at 515. No party can have “substantially prevailed” on the amount in controversy or the most significant issue before a final determination on the merits has been made.4 See, e.g., Wilkerson v. United States, 67 F.3d 112, 120 (5th Cir. 1995)(quoting Heasley v. Comm’r, 967 F.2d 116, 122 (5th Cir. 1992))(“To determine if a party has substantially prevailed, ‘we look to the final outcome of the case, whether by judgment or settlement.’”); Cassuto v. Comm’r, 936 F.2d 736, 741 (2d. Cir. 1991)(“‘[S]ubstantially prevailed’...refer[s] to the final outcome of the case-whether by court judgment or settlement.”); see also, Ralston Dev. Corp., 937 F.2d at 515 (holding that taxpayer did not substantially prevail on the amount in controversy because it only recovered nineteen percent of the amount at issue).5The statute explicitly states that this determination of whether a litigant is a prevailing party is to be made after a final determination in action. See 26 U.S.C. § 7430(c)(4)(C)(“Any determination under this paragraph as to whether a party is a prevailing party shall be made...in the case where such final determination is made by a court, the court.”)(emphasis added). Because Section 7430 is a limited waiver of sovereign immunity, explicitly limited to instances where a final determination has been made and the court has found the applicant for fees to be a prevailing party within the meaning of the statute, this Court lacks jurisdiction to grant Plaintiff’s motion until a final determination is made as required by 26 U.S.C. § 7430(c)(4)(C).

IV. Conclusion

The applicable waiver of sovereign immunity for a claim of attorney’s fees under the Internal Revenue Code, and, thus, 26 U.S.C. §7433, is 26 U.S.C § 7430. Plaintiff is not entitled to attorney’s fees under the Equal Access to Justice Act, as it is inapplicable in a suit where Section 7430 applies. In the limited waiver of sovereign immunity granted in Section 7430, Congress restricted the waiver to actions where a final determination has been made and the court has found the applicant for fees to be a prevailing party within the meaning of the statute. Thus, Plaintiff’s claim for attorney’s fees is not cognizable until a final determination has been made in this case. Wherefore, the United States respectfully requests that the Court deny Plaintiff’s Motion for Interim Attorney’s Fees.

DATED this 24th day of October, 2008.

Respectfully submitted,

KELLY H. RANKIN
United States Attorney

/s/ Adair F. Boroughs
ADAIR F. BOROUGHS
Trial Attorney, Tax Division
United States Department of Justice
CAROL STATKUS
Assistant United States Attorney

CERTIFICATE OF SERVICE

IT IS HEREBY CERTIFIED that a true and correct copy of the foregoing UNITED STATES’ OPPOSITION TO PLAINTIFF’S MOTION FOR INTERIM AWARD OF ATTORNEY’S FEES has been served upon the following by the method(s) indicated below on October 24, 2008:

Lawyer Patriot [ ] By Facsimile
1776 Patriot Circle Court, Suite A [ ] By U.S. mail - postage prepaid
Arlington, VA 22209-2004 [ ] By Hand Delivery
Attorney for Plaintiff [ ] By Overnight Courier
[X] By Electronic Filing

Lawyer Freeman, Esq. [ ] By Facsimile
1776 Patriot Circle Court, Suite B [X] By U.S. mail - postage prepaid
Cheyenne, WY 82003 [ ] By Hand Delivery
Attorney for Plaintiff [ ] By Overnight Courier
[X] By Electronic Filing

/s/ Adair F. Boroughs
Adair F. Boroughs
Trial Attorney, Tax Division
U.S. Department of Justice