08-3802-ag (L)
Bausch & Lomb Inc. & Consolidated Subsidiaries v. Commissioner of Internal Revenue
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUM M ARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUM M ARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERM ITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1. WHEN CITING A SUM M ARY ORDER IN A DO CUM ENT FILED W ITH THIS COURT, A PARTY M UST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (W ITH THE NOTATIO N “SUM M ARY ORDER”). A PARTY CITING A SUM M ARY ORDER M UST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit, held at 2 the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New 3 York, on the 20 th day of December, two thousand ten. 4 5 PRESENT: GERARD E. LYNCH, 6 DENNY CHIN, 7 Circuit Judges, 8 EDWARD R. KORMAN, 9 District Judge.* 10 ------------------------------------------------------------------ 11 12 BAUSCH & LOMB INCORPORATED and 13 CONSOLIDATED SUBSIDIARIES, 14 Petitioners-Appellants, 15 16 v. 08-3802-ag (Lead) 17 09-2612-ag (Con) 18 COMMISSIONER OF INTERNAL REVENUE, 19 Respondent-Appellee. 20 -------------------------------------------------------------------- 21 22 FOR APPELLANT: Roger J. Jones, Andrew R. Roberson, Latham & Watkins LLP, 23 Chicago, Illinois, Kim Marie Boylan, Latham & Watkins LLP, 24 Washington, D.C.. 25 26 FOR APPELLEE: Joan I. Oppenheimer, Richard Farber, Attorneys, for John A. 27 DiCicco, Acting Assistant Attorney General, Tax Division, 28 Department of Justice, Washington, D.C.
*
Honorable Edward R. Korman of the United States District Court for the Eastern District of New York, sitting by designation.
1 Appeals from the United States Tax Court (Diane J. Kroupa, Judge). 2 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND 3 DECREED that the appeals are DISMISSED. 4 Bausch & Lomb and several of its subsidiaries (together, “B&L”) appeal from two 5 orders of the Tax Court, each of which held that the Commissioner’s notice of deficiency was 6 invalid and therefore dismissed for lack of jurisdiction. We find B&L’s appeals do not 7 present a justiciable controversy and therefore dismiss them. 8 We assume the parties’ familiarity with the relevant facts and law, and so we sketch 9 the background only briefly. In 1993, a Bausch & Lomb subsidiary entered into a partnership 10 called Wilmington Partners L.P., contributing to the partnership a note with a face value of 11 $550 million. In 1999, the partners restructured the partnership through a series of 12 transactions that gave rise to the tax dispute at hand. 13 One of the 1999 transactions caused either a substantial gain for B&L and the 14 partnership or a similarly substantial loss, depending on the correct calculation of the basis 15 of the note that B&L contributed to the partnership. B&L and the partnership both reported 16 the note as having an initial basis equal to its face value of $550 million. Based on that 17 number, B&L calculated that it had lost nearly $350 million dollars in the transaction, a loss 18 it spread over its returns for the years 1998 to 2004. The Commissioner, by contrast, treated 19 the note as having an initial basis of zero. If the Commissioner’s assessment was correct, 20 then the loss B&L reported was actually a large gain. The Commissioner therefore issued 21 a final partnership administrative adjustment (“FPAA”) to the partnership for 1999 reflecting
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1 this view of the note’s basis, which the partnership contested in Tax Court. Then, during the 2 pendency of the partnership proceedings in the Tax Court, the Commissioner issued two 3 notices of deficiency to B&L based on the same calculation, one for the years 1998-2001 and 4 one for the years 2002-2004. 5 B&L challenged the Commissioner’s treatment of the note’s basis in Tax Court. The 6 Commissioner then moved to dismiss, arguing that the notices of deficiency were premature 7 so long as the parallel partnership-level proceeding was ongoing. Under the Internal 8 Revenue Code, the tax treatment of a “partnership item” must “be determined at the 9 partnership level,” I.R.C. § 6221, and the Tax Court has held that it “lack[s] jurisdiction over 10 partnership and affected items where the notice of deficiency was issued prior to completion 11 of the related partnership proceeding.” GAF Corp. v. Commissioner, 114 T.C. 519, 527 12 (2000). Because the basis of the note to B&L relates to the basis of the note to the 13 partnership, the Commissioner argued that its notices of deficiency were invalid (absent a 14 final determination of the partnership proceeding) and that the Tax Court therefore lacked 15 jurisdiction. B&L countered, however, that the pendency of the 1999 partnership proceeding 16 did not affect the validity of the notices, because the alleged deficiencies only related to the 17 basis of the note at its contribution in 1993, and the partnership proceeding for the 1993 tax 18 year had concluded with a “no adjustments letter” from the Commissioner. 19 The Tax Court agreed with the Commissioner but did not reach B&L’s substantive 20 arguments. See Bausch & Lomb Inc. v. Commissioner, 97 T.C.M. (CCH) 1577 (2009). It 21 held that each “deficiency notice is invalid because it determines deficiencies and penalties
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1 that flow from the FPAA and the ongoing Wilmington partnership proceeding has not been 2 resolved.” Id. at *1. It disagreed with what it characterized as B&L’s “back-door argument 3 that the Court, in determining the validity of the deficiency notice, is required at the partner 4 level to answer the substantive question of whether respondent adjusted [the partner’s] basis 5 in the 1993 . . . Note in the wrong year or years.” Id. at *4. The court stated that the 6 partnership was availing itself of “the related Wilmington partnership proceeding” to make 7 the “argument that the Commissioner adjusted [the partner’s] basis in the 1993 . . . Note in 8 the wrong years.” Id. The Tax Court therefore held that both the 1998-2001 and 2002-04 9 notices of deficiency were invalid, and dismissed the two cases for lack of jurisdiction. B&L 10 appealed the decision in both cases. In the meantime, the Tax Court ruled in Wilmington’s 11 favor (and thus in B&L’s favor as well) in the partnership proceeding, holding that the 12 relevant adjustments based on the note’s basis were barred by the statute of limitations. 13 Before we may discuss the merits of B&L’s arguments before this Court, we must 14 consider whether we should hear them in the first place. For an appeal to be proper, the 15 judgment appealed must cause some harm to the party appealing. Tachiona v. United States, 16 386 F.3d 205, 211 (2004). This harm must be “‘concrete and particularized’ and ‘actual and 17 imminent.’” Id. at 210, quoting Arizonans for Official English v. Arizona, 520 U.S. 43, 64 18 (1997). We have therefore dismissed, for instance, an appeal by a plaintiff where the district 19 court dismissed a jury verdict on a set of claims, because the jury had awarded $0 damages 20 on those claims, see Spencer v. Casavilla, 44 F.3d 74, 78-79 (2d Cir. 1994), and an appeal 21 by a defendant who sought dismissal on the merits but received only a dismissal for lack of
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1 subject matter jurisdiction, see Concerned Citizens of Cohocton Valley, Inc. v. N.Y. State 2 Dep’t of Envtl. Conservation, 127 F.3d 201, 204-06 (2d Cir. 1997). These cases uphold the 3 principle that “a party who receives all that he has sought generally is not aggrieved by the 4 judgment affording the relief and cannot appeal from it.” Forney v. Apfel, 524 U.S. 266, 271 5 (1998) (quotation marks omitted). 6 In this case, B&L seeks to block the Commissioner from assessing any tax based on 7 its recalculation of the note’s basis. It now has not one but two sets of orders that do just 8 that. In B&L’s own cases, the Tax Court ruled that the Commissioner had issued invalid 9 notices of deficiency and was barred from assessing any deficiencies until the conclusion of 10 the partnership-level case. It may seem strange to treat the dismissals below as a success for 11 B&L, since its petition was dismissed. But the Tax Court’s jurisdictional dismissal, unlike 12 a dismissal in a more typical case, determines the invalidity of the Commissioner’s deficiency 13 notice. For this reason, it is actually common for taxpayers to file a petition and then seek 14 to dismiss it for lack of jurisdiction. See, e.g., Ginsburg v. Commissioner, 127 T.C. 75 15 (2006); Gustin v. Commissioner, 83 T.C.M. (CCH) 1341 (2002); GAF Corp., 114 T.C. 519; 16 Roberts v. Commissioner, 94 T.C. 853 (1990). In those cases, as in this one, the end result 17 is an order prohibiting the Commissioner from assessing any further taxes. In the partnership 18 case, meanwhile, the Tax Court ruled that the relevant adjustments were barred by the statute 19 of limitations. B&L has therefore largely obtained the relief it sought. 20 We say “largely” because B&L, much like the defendant in Concerned Citizens, 21 sought a ruling on the merits but only received one on jurisdictional grounds. Cf. 127 F.3d
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1 at 204. Specifically, B&L requested that the Tax Court invalidate the notices of deficiency 2 on the merits, but the court instead invalidated them as prematurely issued. As in Concerned 3 Citizens, however, we do not think that this different ground creates standing, at least not on 4 the facts of this case, where both the partner-level and partnership-level proceedings have 5 resulted in rulings blocking assessment. 6 We see no harm to B&L from the Tax Court’s rulings below. As in Concerned 7 Citizens, those rulings appear to have no preclusive effect on the merits of future litigation. 8 Cf. id. at 206. The court’s rulings did not reject any of B&L’s substantive arguments – even 9 implicitly – but simply ruled that they should first be addressed in the partnership-level case 10 before the court would have jurisdiction over them in the partner-level case. 97 T.C.M. 11 (CCH) 1577, at *4-5. Furthermore, unlike in Concerned Citizens, the court’s ruling did not 12 even shift the litigation to a different venue. The partnership case – in which B&L was 13 participating – proceeded in the same court and in fact in front of the same judge, and has 14 since been appealed to this same circuit court. 15 We do not distinguish this case from Concerned Citizens because the party appealing 16 happens to be a petitioner in this case where it was a defendant in that one. Although 17 perhaps such a difference might matter in many situations – because an ordinary petitioner 18 or plaintiff has more freedom to structure the relief sought and thus may complain more 19 easily about not receiving that precise relief – the Tax Court presents a special situation. 20 Although B&L has nominally sued the Commissioner, its suit was purely defensive, seeking 21 to parry the Commissioner’s collection thrust. One could imagine a system where, instead
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1 of the Commissioner issuing a notice of deficiency and the taxpayer suing to contest it, the 2 Commissioner simply sued the taxpayer, who then would defend either on jurisdictional 3 grounds or on the merits. Such a system would differ little, from our perspective at least, 4 from the procedure in this case. In all relevant respects this case is equivalent to Concerned 5 Citizens. 6 B&L only briefly tries to explain the harm it would suffer from the Tax Court’s ruling. 7 It argues that the ruling it sought would have foreclosed any further attempt to assess the 8 alleged deficiencies, while the Tax Court’s dismissal of its cases “may not permanently 9 foreclose the Commissioner from later asserting the same tax deficiencies by issuing new 10 Notices.” But the possibility that the Commissioner may someday issue a new deficiency 11 notice raising the same issues does not create a current, concrete injury that B&L may litigate 12 today with respect to deficiency notices that have been ruled invalid by the Tax Court and 13 in effect withdrawn by the Commissioner. Indeed, the chance that the Commissioner will 14 ever impose such a new notice is highly contingent. For such an eventuality to occur, the 15 Commissioner would have to win a reversal of the partnership-level case in this Court or in 16 the Supreme Court. Then, because the Tax Court decided the partnership-level case based 17 on the statute of limitations, the partnership (and B&L) could still press its unrelated 18 argument about the 1993 no-adjustment letter in that case on remand, and might succeed. 19 If that argument failed in the Tax Court, B&L would be able to seek a further appeal to this 20 Court (and on to the Supreme Court). Only if B&L lost on all these issues in all these fora
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1 could the Commissioner then reissue the notices of deficiency that the Tax Court found 2 invalid here. We find this possibility too remote to make the case fit to hear now. 3 For these reasons, we dismiss. 4
5 6 FOR THE COURT: 7 Catherine O’Hagan Wolfe, Clerk of Court