Free Reply to Response to Motion - District Court of Federal Claims - federal

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No. 05-1060 T

Honorable Christine O.C. Miler

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

JOHN G. BERG,
Plaintiff,
v.

THE UNITED STATES,
Defendant.

REPL Y BRIEF OF THE UNITED STATES IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT AND REQUEST FOR ORAL ARGUMENT

The United States hereby submits its reply brief in support of its motion to dismiss the
complaint for failure to state a claim upon which relief can be granted and for lack of subject

matter jurisdiction. The United States requests oral argument on this motion.

ARGUMENT
i. The execution of

Form 4549 by plaintiff and the IRS agent did not create a binding settlement agreement that plaintiff may enforce.
Form 4549,

Plaintiff cannot prevail under a contract theory because the execution of

Income Tax Examination Changes, is not a binding settlement agreement. Even assuming the
revenue agent or district director had settlement authority, Form 4549 "does not constitute an
agreement by the Secretar to anything, much less a final closing agreement." Hudock v.

Commissioner, 65 T.e. 351, 362-63 (1975); Holland v. Commissioner, 70 T.e. 1046, 1048-49
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(1978), aff'd, 622 F.2d 95 (4th Cir. 1980). Form 4549 merely evidenced plaintiffs consent to the
immediate assessment and collection of

the deficiency proposed therein, Hudock, 65 T.C. at 363,

leaving open the prospect of future dispute and litigation of the liability so assessed and
collected.!

Plaintiff cites several cases for the proposition that the audit report (Form 4549)

constitutes a binding contract, governed not by statute, but by general contract law. However, the
cited cases applied the principles of contract law to give binding effect to settlement agreements

entered into by parties to a law suit. With one exception,2 the issue in each case cited by plaintiff

was the effect or enforceability of a settlement agreement entered into by paries during litigation.
See Buesing v. United States, 42 Fed. ei. 679 (1999) (enforcing an agreement made by the IRS

during a bankptcy proceeding to release a lien in exchange for cash); Estate of Kokernot v.
Commissioner, 1 12 F.3d 1290 (5th Cir. 1997) (interpreting the terms of a settlement stipulation

merely "consent(ed) to the immediate assessment and collection of any increase in tax and penalties, and accept( ed) any decrease in tax and penalties
1 By signing Form 4549, plaintiff

shown above." (See Form 4549, eompl., Ex. 5.)

2 In Goldman v. Commissioner, 39 F.3d 402 (2d. Cir. 1994), the cour gave binding effect

to Form 870-AD, but held that a settlement proposal letter sent to the taxpayer by the IRS could
not be binding until executed "in a separate closing agreement." Id at 406. This Court has also

given binding effect to a properly executed Form 870-AD on the theory of equitable estoppel. See Kretchmar v. United States, 9 Cl. Ct. 191, 196-97 (1985). In Kretchmar, the cour found their that, by executing Form 870-AD, the plaintiffs waived their right to further litigation of claims, and that to allow litigation of those claims after the IRS's opportunity to assess and collect additional tax had expired would significantly prejudice the Governent. Id at 198. The Form 870-AD that, once the form is executed, "the court highlighted the express language of case shall not be reopened in the absence of' certain enumerated contingencies, and that "no claim for refund or credit shall be filed or prosecuted for the year(s) stated above other than for amounts attributed to carrybacks provided by law." Id. at n.2; cf Hudock, 65 T.C. at 363
(holding that equitable estoppel did not apply to preclude further assessments by the governent
after the execution of change of

Form 4549 because that act did not establish the requisite substantial position by the taxpayer in detrimental reliance on the Governent's conduct).
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reached while the case was pending before the Tax Cour); Washoe Ranches #1 Ltd v.

Commissioner, T.e. Memo 1996-495 (interpreting the terms of an agreement purorting to settle
all cases involving certain parnerships); Principal Mut. Life Ins. Co. v. United States, 29 Fed. el.
157 (1993) (enforcing a settlement entered into before the court's final decision was issued,

while the case was stil pending); Kurio v. United States, 429 F.Supp. 42 (S.D. Tex. 1970)

(refusing to enforce an alleged settlement agreement entered into while a tax refud suit was
pending).

The United States does not contest that general principles of contract law apply to the
compromise and settlement of

tax cases during litigation.3 Under 26 e.F.R. § 301.7121-1(d)(1),
that case be

once a case is docketed in the Tax Court, there is no requirement that a settlement of

concluded by way of a section 7121 closing agreement. Haiduk v. Commissioner, T.C. Memo.

1990-506; Treaty Pines Invs. P'ship v. Commissioner, 967 F.2d 206, 212 (5th Cir. 1992).

Likewise, as this Cour well knows, the United States settles tax refund litigation by agreements
embodied in letters.

Nevertheless, prior to litigation, the settlement or final closure of a civil tax dispute with

the IRS is a matter controlled by statute. See I.R.e. §§ 7121 (closing agreements), 7122
(compromises); see also Treas. Reg. §§ 301.7121-1, 601.202(b), 301.7122-1, 601.203(b). These
provisions provide the exclusive method for settling civil tax disputes with finality. See, e.g.,

3 General contract principles also apply to compromises, Robbins Tire Co. v.

Commissioner, 52 T.C. 420,435-36 (1969), and final closing agreements, Silverman v.
Commissioner, 105 T.C. 157,161 (1995), aff'd, 86 FJd 260 (1st Cir. 1996); Rinkv. Commissioner, 47 F.3d 168, 171 (6th. Cir. 1995); Smith v. United States, 850 F.2d 242,245 (5th
eir. 1988); Last v. United States, 37 Fed. Cl. 1,6-7 (1996), that are executed pursuant to the

established statutory provisions. See 1.R.c. §§ 7121 and 7122.
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Hamilton v. United States, 324 F.2d 960,963 (Ct. Cl. 1963) (compromises); Hudock v.

Commissioner, 65 T.C. 351,362 (1975) (closing agreements). The very fact that Congress has
provided a way in which the IRS may bind itself precludes the possibility of its being bound by
some other procedure. Knapp-Monarch Co. v. Commissioner, 139 F.2d 863, 864 (8th eir. 1944).

Plaintiffs argument that Form 4549 created a binding agreement is without merit, and he has
failed to state a claim upon which relief can be granted.
II. Plaintiff s pursuit of permissive administrative remedies did not operate to

toll the statute of limitations.

Plaintiff had no contract conferring on him the right that he claims. Assuming arguendo
that there was such a contract, plaintiffs pursuit of

permissive administrative remedies would not

have tolled the statute of

limitations provided by 28 U.S.C. § 2501. Under that section, suit must

be filed "within six years after such claim first accrues." Since plaintiff filed his lawsuit in
October 2005, his cause of action must have first accrued no earlier than October 1999 to be

viable. A cause of action accrues when all of the events necessar to fix the alleged liabilty of a
defendant have occurred, and the claimant is legally entitled to bring suit. Catawba Indian Tribe
of

South Carolina v. United States, 982 F.2d 1564, 1570 (Fed. Cir. 1993). Once the United

States has met its burden of proof as to the statute of limitations defense, a plaintiff has the
burden of

proving an exception. Seldovia Native Ass 'n v. United States, 35 Fed. el. 761, 769

(1996), aff'd, 144 F.3d 769 (Fed. Cir. 1998).
Plaintiff's contract claim accrued no later than any of

four possible dates: (1) April 4,

1991-when the "contract" was executed, (2) May 2, 1991-when the IRS informed plaintiff of a
balance due, (3) August 4, 1995-when the IRS rejected plaintiff's first offer in compromise, or

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(4) when the IRS failed for years to make the refund. Each event occurred much more than six
years before plaintiff

filed suit on October 3,2005.
has not met his burden of proving an exception to the statute of

Plaintiff

limitations.

Plaintiff s argument appears to be that his fiing offers in compromise on April 1 1, 1995 and
again on Februar 26, 1999 (see plaintiffs offer, Compl. at Ex. 6) either tolled the statute of
limitations or caused his claim to accrue upon the IRS's rejection of

the second offer by letter

dated July 17,2002 (see rejection letter, CompL. at Ex. 7). Whichever be his argument, it
nevertheless fails.

If a dispute is subject to mandatory administrative proceedings, then the claim does not

accrue until their conclusion. Crown Coat Front Co. v. United States, 386 U.S. 503, 511 (1967);
Nager Elec. Co. v. United States, 368 F.2d 847, 853 (Ct. Cl. 1966); Friedman v. United States,
310 F.2d 381, 385-86 (Ct. Cl. 1962). However, pursuit of

permissive administrative remedies

does not toll the statute oflimitations. Soriano v. United States, 352 U.S. 270, 274-75 (1957);
Clyde v. United States, 80 U.S. 38, 39 (1871); Lins v. United States, 688 F.2d 784, 787 (et. el.

1982); Camacho v. United States, 494 F.2d 1363,1369 (et. el. 1974); Friedman v. United
States, 310 F.2d 381,385-86 (Ct. Cl. 1962). Unless suit is brought under an act or contract
requiring a prior administrative determination as a prerequisite to suit, filing a claim with an
administrative agency canot postpone the operation of the statute of limitations. E.g., Lipp v.

United States, 301 F.2d 674,674 (et. el. 1962); International Potato Corp. v. United States, 161
F.Supp. 602 (Ct. Cl. 1958).

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Plaintiff does not cite any authority to suggest that a contract dispute with the IRS is subject to mandatory administrative proceedings.4 The filing of an offer in compromise (Form

656), pursuant to I.R.C. § 7122, is not a statutorily mandated administrative proceeding. Filng
such an offer is merely an alternative available to a taxpayer who is unable to pay a liability or

make other payment arangements, and is subject to acceptance by the IRS. Ironically, plaintiff
waived the routine administrative appeals to which he was entitled: On the Form 4549, on which
plaintiff bases his contract claim, plaintiff affirmed by his signature that he did "not wish to

exercise (his) appeals rights with the Internal Revenue Service." (See Form 4549, eompl., Ex.

5.) Apar from plaintiff's offers in compromise, there is no record of appeal ever being made to
the Appeals Office within the IRS. It would be absurd if a claimant could unilaterally and
indefinitely toll the statute of limitations-created by Congress for the express purpose of giving

repose to the United States against stale claims-by fiing a series of settlement offers. None of
plaintiffs actions tolled or delayed the accrual of

the statute oflimitations provided in 28 u.s.e.

§ 2501, and his claim is too late.
III. The doctrines of collateral estoppel and iudicial estoppel do not apply in

this case.

The doctrines of collateral estoppel and judicial estoppel do not apply to this case.

Plaintiffs argument of collateral estoppel has several fatal problems. First, for collateral
estoppel to apply, the previous determination must have been made by a court of competent
jurisdiction. Montana v. United States, 440 U.S. 147, 153 (1979); Morgan v. Dept. of Energy,

4 This is not a tax refud suit; therefore, the mandatory filing of an administrative claim
(see I.R.C. § 7422(a)) applicable to such suits is not relevant in this case.

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424 F.3d 1271, 1274 (Fed. Cir. 2005). The district court in Berg v. United States, No. 2:04:cv-

0327RB (E.D. Pa., 2005), plaintiffs prior suit, dismissed plaintiffs contract claim precisely
because the cour lacked

jurisdiction under 28 U.S.C. § 1346(a)(2), which gave the court

jurisdiction only over claims not exceeding $ 1 0,000 that are founded upon any express or

implied contract with the United States. (See district cour's opinion memorandum, Pi"s Br., Ex.
3.)

Second, a dismissal without prejudice, like the district cour's order in this case (see Pl.'s
Br., Ex. 3), does not operate as a decision on the merits, and thus does not have res judicata

effect. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384,396 (1990); see also Garden Constr.
Co., Inc. v. United States, 423 F.2d 273,275 (et. el. 1970).

Third, collateral estoppel applies only if the issue previously adjudicated is identical to

the present issue. Thomas v. General Services Admin., 794 F.2d 661, 664 (Fed. eir. 1986). The

issue before the district cour was the procedural question whether the cour had jurisdiction over
plaintiffs contract claim under 28 U.S.C. § 1346(a)(2), not the merits question whether the

execution of

Form 4549 constitutes a binding agreement. Accordingly, the district court found

that plaintiffs claim was "an action in contract" or "a claim to enforce a contract." (See district
court's opinion memorandum, Pl.'s Br., Ex. 3.) The court did not reach the merits of

that claim

to find that there was a contract. Therefore, collateral estoppel does not bar the United States
from asserting that no binding agreement exists between plaintiff and the IRS.
Similarly, there are no grounds that

justify judicial estoppel in this case. "The doctrine of

judicial estoppel is that where a par successfully urges a paricular position in a legal

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proceeding, it is estopped from taking a contrar position in a subsequent proceeding where its
interests have changed." Data Gen. Corp. v. Johnson, 78 FJd 1556, 1565 (Fed. Cir. 1996).

Plaintiff argues that the United States, having convinced the district court that it lacked

jurisdiction over plaintiffs contract claim, "canot now reverse course and argue that there was
no contract." (Pl.'s Br. at 8.) The United States' litigating position, however, has been

consistent, both before the district cour and before this eourt. In his complaint fied with the
district court, plaintiff postured his claim as one arising in contract. (See PI. Br., Ex. 1 at ~~ 6-

15.) In its answer in the district cour, the United States disputed plaintiffs contractual claim.
(See PI. Br., Ex. 2 at irir 9-12.) In its dispositive motion in the district court, the United States

argued that, in addition to being time-barred under 28 U.S.C. § 2401, plaintiffs "alleged
contract" claim exceeded $10,000 and, therefore, the court lacked jurisdiction to entertain it.

(See Ex. 1 at 5-6, attached hereto.) That position is consistent with the United States' argument
on the merits before this Cour that the execution of

Form 4549 did not create a binding contract

entitling plaintiff to a cash refud. In its dispositive motion, the United States insisted that the
only agreement between the paries was as to "audit changes" (see Ex. 1 at 9, attached hereto),

and that the figure of$179,241 on Form 4549-which plaintiff claims constituted an agreement to

pay him that amount-"in no way represent(s) the final liability. . ." (id at 2). The United States
characterized plaintiffs position as "a transparent attempt. . . to perpetrate a form of

fraud" (id

at 3) and called his claims "factually groundless" (id at 4). It was only "(fJor purposes of

this

motion" that the Governent, arguendo, did not dispute the existence of a contract. (Id. at 5.)

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Moreover, the United States disagrees that plaintiff, having sought equitable relief in the

district cour, is "greatly prejudice( d)" by litigating his claim in this Court. Plaintiff s equitable
claim in mandamus was already decided on the merits against plaintiff in the district court. (See

district cour's memorandum opinion, Pl.' s Br. at Ex. 3.) Additionally, any time-bar to plaintiff s claim in this case would also have applied in the district cour, because plaintiff s complaint in
the district cour was not fied until July 12,2004, after the expiration of

the six-year statute of

limitations imposed by 28 U.S.C. § 2401.

CONCLUSION
The Court should enter judgment in favor of

the United States dismissing plaintiffs

complaint.
Respectfully submitted,

Februar 10.2006

Date

s/Jacob Christensen JAeOB E. eHRISTENSEN Attorney of Record U.S. Deparment of Justice Tax Division Federal Claims Section Cour of Post Office Box 26

Ben Franlin Post Office
Washington, D.e. 20044
Voice: (202) 307-0878

Fax: (202) 514-9440
Email: jacob.e.christensen~usdoj .gov

EILEEN 1. O'eONNOR Assistant Attorney General DAVID GUSTAFSON
Acting ehief, eour of

Federal elaims Section

Of eounsel

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No. 05-1060 T Honorable Christine O.C. Miller

IN THE UNITED STATES eOURT OF FEDERAL eLAIMS

JOHN G. BERG,
Plaintiff,
v.

THE UNITED STATES,
Defendant.

STATEMENT OF JAeOB E. eHRISTENSEN

I, Jacob E. ehristensen, pursuant to the provisions of28 u.s.e. § 1746, state as follows:

1. I am the trial attorney assigned by the Deparment of Justice to defend the interests
ofthe United States in the case captioned above, and I have possession ofthe Deparment's
litigation fie of Berg v. United States, No. 2:04:cv-0327RB (E.D. Pa., 2005), a case fied by plaintiff on July 12,2004, in the United States District Cour for the Eastern District of
Pennsylvania.
2. The fie contains the following document, that, to the best of my knowledge and

belief, is a true and correct copy of

what it purports to be (and a copy of

which is attached

hereto) :

Exhibit
1

Description
Memorandum of

the Defendant in Opposition to Motion for Judgment on the Pleadings and in Support of Cross-Motion for Summary Judgment.

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Executed in Washington, D.C. under penalty of

perjur on Februar 10,2006.

s/Jacob Christensen Jacob E. Christensen
Attorney of Record

Us. Department of Justice
Tax Division

Court of Federal Claims Section
Post Offce Box 26

Ben Franklin Post Offce
Washington, D. C. 20044

Voice: (202) 307-0878
Fax: (202) 514-9440

Email: jacob. e. christensen~usdoj.gov

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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

JOHN G. BERG

)

Plaintif,
v.

) ) )
)

Civil No. 04-3278

) )

JOHN H. SNOW, SECRETARY OF THE TREASURY,

) )

Defendant.

)
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MEMORANDUM OF THE DEFENDANT IN OPPOSITION TO MOTION FOR JUDGMENT ON THE PLEADINGS AND IN SUPPORT OF CROSSMOTION FOR SUMMARY JUDGMENT
John H. Snow, Secretary of the Treasury, through his undersigned counsel, has

opposed the plaintif's motion for judgment on the pleadings and further moved this
Court, pursuant to Rule 56, Federal Rules of Civil Procedure, to enter summary

judgment in his favor on the grounds that there are no genuine issues of material fact

and defendant is entitled to judgment as a matter of law on the issues presented in this
action.
STATEMENT

The relevant facts as are established in the complaint and answer as specified in

this memorandum and in the attached Exhibit A to this memorandum, certiied copies
under seal of Forms 4340, Certificates of Assessments and Payments with respect to
plaintif for the years 1986 through 1989.1

i The Certiicates of Assessments and Payments are admissible public records.
Hughes v. United States, 953 F.2d 531 (99th Cir. 1992); In re Garm, 114 B.R. 414

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The Internal Revenue Service conducted an audit of plaintif's income tax
returns for the years 1986 through 1989 between February and April of 1991. (Comp.
and Ans., pars. 5, 6)

Following the audit, the Service prepared a report, Form 4579, Department of

the Treasury- Internal Revenue Service Income Tax Examnation Changes ("Audit
Report) stating the results of the audit. (Comp. and Ans., pars. 12-14; Ex. 1 to Comp.)
The report was agreed to by the parties and was executed on Apri14, 1991. Essentially,

it was agreed that the audit changes were that plaintif had an overpayment of tax for
1986 in the amount of $179,241, and an underpayment for 1989 in the amount of

$99,559. Clearly, this meant that the tax liability of the plaintif for the year 1986 had to

be changed by subtracting $179,241 from the existing liabilty and the liabilty for the
tax year 1989 had to be changed by adding $99,559 to the liabilty. The two figures in no way represent the final liability for either of those two years. For that, the parties

must turn to Exhibit A to this memorandum, the Form 4340, Certiicate of
Assessments and Payments for plaintiff for 1986 through 1989 ("Certiicate"). The

above facts and the Certiicate constitute the relevant factual bases for the plaintif's
and the Secretary's motions.

In his memorandum in support of his motion, plaintif proceeds to make
outrageous and unwarranted inferences from the above facts, which inerences do not

(Bkrtcy. W.D. Pa. 1990).
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constitute a legitimate portion of the undisputed statement of facts. Plaintif somehow
concludes from his inferences and arguments that he was due an actual cash refund of
$179,241.20 for the year 1986. In fact, the Certiicate establishes that for 1986, plaintif

fied his 1986 income tax return on October 15, 1987, and was assessed $179,241.20 in

tax on November 30,1987. Plaintif was also assessed a penalty and interest on that

same date. On May 20, 1991, immediately after the signg of the Audit Report on
April 4, 1991, and in accordance with that Audit Report, plaintiff was credited with the
-

overpayment of $179,241.20. The assessed penalty and interest were also abated on that
same date.

The Certiicate also demonstrates that plaintif was assessed the additional
$99,559 for the year 1989 on May 20, 1991, in accordance with the Audit Report, and
that his final

liabilty was $124,027 for that year. What is particularly noticeable in the

Certiicate about the transactions for the years 1986 through1989 is that plaintif never
paid any tax for those years, particularly not the original assessments of $179,241.20 or

$24,468 for the respective years 1986 and 1989.

Plaintif then supposedly waited patiently for his alleged "refund" for over

thirteen years before fiing the present complaint, allegig as his jurisdictional bases
28 U.se. § 1361 and 28 U.se. § 1651 (mandamus!).

ARGUMENT

The complaint is a transparent attempt by plaintif to perpetrate a form of fraud
against the United States. Plaintif has received the benefits of an overpayment of tax
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determied by an IRS audit for the year 1986 by virtue of an abatement or credit of that

amount of tax for that year. Now, plaintif is attempting to reap a double benefit by
additionally requesting that the same amount already credited to his account be

refunded to him in cash. The attempt is to be facilitated by puttng blinders on the
Court under a contrivance of the parol evidence rule so as to prevent the court from examining the facts and circumstances surrounding the audit, the most glaring fact

being that plaintif never paid the amount he now seeks to be refunded.
-

. In order to effectuate his scheme, plaintif has brought a mandamus action in
equity because the statutes of limitations on tax refund actions and contract actions
have long since expired. Despite his wiles, this action is clearly not properly one for

mandamus, and as such, it should be dismissed. Moreover, an action on contract,
which is precisely what this case represents, is to be brought exclusively in the Court of

Federal Claims and this Court has no jurisdiction over the alleged contract dispute.
Finally, plaintif's claims are factually groundless, the Service having already complied

with the terms of the audit report in question, as stated above.
A. This Suit Is Clearly an Action on Contract and It Is Time Barred.

Plaintif has brought this action, alleging jurisdiction pursuant to 28 U.s.c. §
1361, the federal mandamus statute. (CompL. par. 3.) This is clearly a case wherein

mandamus wil not issue since it is transparently an action on a contract disguised as a
mandamus action in order to gain this Court's jurisdiction.

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Plaintif readily admits that this is an action on contract. Plaintif's arguments in
the memorandum in support of his motion for judgment on the pleadings are all
couched in terms of contract law. After a brief analysis of the requirements for

judgment on the pleadings, plaintif launches imediately into a discussion of contract
law in Section C of the memorandum in which he argues that the Audit Report

constitutes a contractual agreement. Plaintif cites cases decided by the Court of
Federal Claims and various circuit courts for the proposition that a settlement
-

agreement between the IRS and a taxpayer is a binding contract. For purposes of this
motion, the government does not dispute that a valid contract existed in the form of the

Form 4549. It disputes plaintif's wildly contradictory and inaccurate inferences drawn
from the Form 4549 by plaintif.
In Section D, plaintif concludes that a valid contract existed, that the IRS

breached the contract, and that, therefore, the plaintif is entitled to judgment on the

pleadings. On page 8 of the memorandum, plaintif makes it clear that the judgment
on the pleadings be a money judgment in the amount of $149,733.

Oddly, nowhere in the memorandum is a discussion of mandamus. Clearly,
this is an action to enforce a contract or to be awarded money damages on a contract.
As such, the action is time barred. As stated above, the audit report was agreed to on

Apri14, 1991. There is a six year statute of limitations on such suits against the

government. 28 U.S.c. § 2401; Saffron v. Department of the Navy, 561 F.2d 938 (D.C.
Cir. 1977), cert. denied, 434 U.s. 1033 (1977). This action was fied on July 12, 2004.
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Moreover, the Court of Federal Claim has exclusive jurisdiction over any
contract claims against the governent in excess of $10,000 and this Court would be

without jurisdiction to rule on the merits of the contract dispute even if it were not
barred. Bonnett Enterprises, Inc. v. United States, 889 F. Supp. 208 (W.D. Pa. 1995); 28
U.se. § 1346(a)(2) and 1491(a)(2).2

B. This Is Not a Proper Mandamus Action.

. In anticipation of plaintif's forthcoming arguments concerning the efficacy of an actual mandamus action, it is clear that, under the facts and circumstances of the
present case, mandamus wil not issue. Mandamus is not favored except in

extraordinary circumstances. Wil v. United States, 389 U.s. 90, 95 (1967). The facts and

circumstances in the present case cry out for dismissal or sanctions, not mandamus.

The propriety of entertainng an action for mandamus in the federal system is
well defined. First, the petitioner must show a clear right to the relief sought, the

respondent must have a clear duty to perform the particular act, and that no other
adequate remedy is available. Green v. Heckler, 742 F.2d 237, 241 (5th Cir. 1984). The

petitioner must demonstrate that the right to the issuance of the mandamus is clear and

2Before continuing, it should be made abundantly clear that the government is

not using the statute of limitations or jurisdictional arguments to circumvent paying

plaintif his proper refund since plaintif's contract claim is totally without merit, as
wil be discussed more completely below.

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indisputable. Alled Chemical Corp. v. Daifon, Inc., 449 U.S. 33, 35 (1980). The plaintif

fails on all counts.

First, plaintif cannot possibly demonstrate that the right to a refund of tax for
the year 1986 is clear and indisputable.3 As the Certiicate for 1986 clearly establishes,
plaintif never paid any tax for the year 1986. The Certiicate establishes a prima facie

case that plaintif made no payments on the original assessment of $179,241 for the tax
year 1986 before or after the Audit Report was completed. Psaty v. United States, 442
-

F. 2d 1154, 1159 (3d Cir. 1971). It is, therefore, mathematically impossible for him to

receive a refund since there are no funds from which the refund could be generated.
Secondly, mandamus wil not lie unless the duty of the public official is so clear
as to be free of doubt. See, Nova Stylings, Inc. v. Ladd, 695 F. 2d 1179, 1180 (9th Cir.

1983). In the present case, not only does the Secretary have no clear duty to make the
refund, it would be ilegal to do so. Sec. 6511(b) of the Internal Revenue Code (26
U.5.c. § 6511(b)) plainly provides that there can be no refund of tax unless there has

been a payment of tax within the three years prior to the fiing of a claim for refund. In
the present case, plaintif paid no tax for 1986 and the law rightly prohibits a refund.

Thirdly, plaintif had two adequate legal remedies. He could have filed a claim
for the refund with the IRS and then filed a tax refund suit pursuant to 26 U.S.c. § 7422.

3This case should not be confused with the case of First Federal Savings and
Loan of Durham v. James Baker, 860 F.2d 135 (4th Cir. 1988) wherein the IRS admitted

that petitioner was due a refund but refused to issue the refund on a techncality that was largely the fault of the IRS.
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In addition, he could have filed a suit for breach of contract in the Court of Federal

Claims. Plaintif did neither, and the reasons are obvious. He knew he could never
prevail in a refund suit because he knew he never paid any tax for 1986. He also knew

that the IRS had already fulfiled the terms of the Audit Report by crediting the
$179,241 to his account for the year 1986. So his only hope was to wait until he was

certain that the IRS files were destroyed ( see, Compo par. 33), file this suit and try to

use some convoluted version of the parol evidence rule to keep out the fact that the IRS
already credited the refund amount against the 1986

liabilty and that he never paid

any tax for 1986, making the refund an impossibilty.

Under these circumstances, mandamus is out of the question.

C. The IRS Has Performed Its Obligations Under the Audit Report.

It is obvious that plaintif and his counsel are playing a dangerous game of
attempting to fie a false claim against the federal government based largely on

semantics and an unorthodox reading of the parol evidence rule. The resulting
changes in the Audit Report of April

4, 1991, provided that plaintif had an

overpayment due for the year 1986 in the amount of $179,241, and an underpayment
due for 1989 in the amount of $99,559. As stated above, the IRS credited plaintif's 1986

account in the amount of $179,241 on May 20, 1991, and abated any assessed interest or
penalty due. The net result was that plaintif's 1986

liabilty was reduced to zero. The

IRS also assessed the additional $99,559 for 1989. Simply stated, the IRS performed its
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end of the bargain and carried out the terms of the audit changes to perfection. There is
no cause of action.

Sec. 7422(d) of the Internal Revenue Code (Title 26 U.se.) plainly provides that

the credit of an overpayment is deemed to be a payment of tax at the time that the
credit is allowed. Therefore, the IRS clearly performed on its obligations under the

Audit Report by crediting the overpayment shown on the Audit Report changes on
May 20, 1991.
-

. Instead of accepting the obvious facts as true, plaintif attempts to have the

Court look at the Audit Report with blinders, alleging that line 15 of the Audit Report

did not represent" changes" to be made, but that it represented the final tax liabilties
for 1986 and 1989. To accomplish this, plaintiff attempts to exclude the evidence of the

IRS's crediting of the overpayment on May 20,1991, and the evidence that plaintif, in

fact, made no payments against his 1986 tax liabilty. The government's absolute

defense was raised in the Answer (par. 9) and the Certiicate was forwarded to
plaintif's counsel with the request that this suit be voluntarily dismissed. Instead,
plaintif presses on with his untenable position.

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CONCLUSION

For the above reasons, the plaintif's motion for judgment on the pleadings

should be denied and the government's motion for summary judgment should be

granted. The complaint, as far as it is based on contract, should be dismissed with

prejudice as untiely and not withi the jurisdiction of this Court, and as far as it seeks
mandamus against a federal official, dismissed, with prejudice.

-

Respectfully submitted,

PATRICK L. MEEHAN

United States Attorney
gh 1138

GREGORY S. HREBINIAK

Trial Attorney, Tax Division U.S. Department of Justice
Post Office Box 227

Ben Frankin Station Washington, D.C. 2004
Telephone: (202) 307-6346

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