Izen 2-IRS 0

Joe Izen's site for this case UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT ____________________________________

ROBERT L. DUFRESNE; CAROLYN S. DUFRESNE,.... )
.................Petitioners-Appellants, )
...............v........................ )
........................................ )
COMMISSIONER, INTERNAL REVENUE SERVICE,..... )
.................Respondent-A ppellee... )

T.C. No. 15907-84

No. 92-70346

_________________________________________

JERRY DIXON; PATRICIA DIXON, )
Petitioners-Appellants, )
V. )
COMMISSIONER, INTERNAL REVENUE SERVICE, )
Respondent-A ppellee. )

No.92-70355

T.C. No. 9382-83

_________________________________________

RICHARD HONGSERMEIER; FIORELLA HONGSERMEIER, )
Petitioners-Appellants, )
)
V. )
)
COMMISSIONER, INTERNAL REVENUE SERVICE, )
Respondent-A ppellee. )

No.92-70352

T.C. No. 29643-86

6291

6292 DUFRESNE v. CIR

____________________________________

HOYT W. YOUNG; BARBARA D. YOUNG, )
Petitioners-Appellants, )
V. )
COMMISSIONER, INTERNAL REVENUE SERVICE, )
Respondent-Appellee. )

No. 92-70347

T.C. No. 4201-84

___________________________________________

TERRY D. OWENS; GLORIA OWENS, )
Petitioners-Appellants, )
V. )
COMMISSIONER, INTERNAL REVENUE SERVICE, )
Respondent-Appellee )

No.92-70349

T.C. No. 40159-84

___________________________________________

RALPH RINA, )
Petitioners-Appellants, )
V. )
COMMISSIONER, INTERNAL REVENUE SERVICE, )
Respondent-A ppellee. )

No.92-70662

T.C. No. 17640-83

Appeal from the United States Tax Court

Argued and Submitted

April 11, 1994-San Francisco, California

Filed June 14, 1994

DUFRESNE V. CIR 6293

Before: Alfred T. Goodwin, Warren J. Ferguson, and

Stephen S. Trott, Circuit Judges.

Per Curiam

________________________________________________________________

SUMMARY______________________________________________________

Tax/Litigation and Procedure (Civil) Attorneys and Judges

The court of appeals vacated a decision of the United States Tax Court and remanded with directions.
The court held that the tax court must conduct an evidentiary hearing to determine if the government's
secret settlement agreements with plaintiffs in tax cases warrant vacating the tax court's decision.

Appellee Commissioner of the Internal Revenue Service disallowed interest deductions claimed by
taxpayers who participated in certain investment programs. Approximately 1300 cases were filed in the tax
court by participants seeking a redetermination of tax deficiencies assessed against them. >From those
cases, a group were chosen by the parties as test cases. It was agreed that the decision in the tax cases
would be binding in all the cases.

The tax court found that the interest deductions were not allowable. The court entered decisions against
the taxpayers determining deficiencies in their tax liability.

The Commissioner filed motions in the test cases to vacate the decision and to conduct an evidentiary
hearing. The Commissioner stated that it appeared that prior to the trial of the test cases, a secret
settlement agreement been entered into between her district counsel and one of the test case plaintiffs,
contingent upon the plaintiff not prevailing in his case. The

6294 DUFRESNE v. CIR

Commissioner further stated that a similar contingent settlement might also have been reached with
another plaintiff prior to trial and which similarly had not been disclosed. The Commissioner pointed out
that, under the agreements, the government, in effect, agreed to pay the legal fees for the two test case
plaintiffs. The tax court denied the Commissioner's motion.

One of the test case plaintiffs, appellant Ralph Rina, filed a motion to reconsider the tax court's order
denying the Commissioner's motion to vacate. Rina's motion was denied. Rina and others appealed.

[1] The taxpayers, the government, and the tax court have allbeen cheated by the conduct described by
the Commissioner and Rina, [2] it could not be determined from the record whether the extent of
misconduct rose to the level of a structural defect voiding the judgment as fundamentally unfair, or
whether, despite the government's misconduct, the judgment could be upheld as harmless error. [3] Thus,
the tax court's decision was vacated. The tax court was directed to conduct an evidentiary hearing to
determine the full extent of the admitted wrong done by the government trial lawyers.

_________________________________________________________________

COUNSEL

Joe Alfred Izen, Jr., Bellaire, Texas, for petitioners-appellants Robert L. DuFresne, et a!.

Steven Parks, United States Department of Justice, Washing- ton, D.C., for respondent-appellee
Commissioner Internal Revenue Service.

______________________________________________________________________________

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